Why Goldman Stock Is Up 57% This Year

The bank’s Q3 results were also solid with earnings coming in at $8.40 per share, well ahead of analyst estimates and up from $5.47  in the year-ago quarter. Net revenues stood at $12.70 billion, 7% higher compared to the year-ago quarter. Growth was driven by the Global Banking & Markets segment (which includes investment banking and sales & trading) which posted revenues of $8.55 billion, up 7% year-over-year. The segment saw a boost in investment banking activity with debt underwriting activity on the rise, led by leveraged finance and investment-grade issues. Equity underwriting has also picked up led by secondary offerings. Equities’ revenues rose 18% year-over-year to $3.50 billion, led by higher net revenues in Equities intermediation. Asset & Wealth Management – another area where Goldman has traditionally been strong – also did well with revenue rising 16% year-over-year to $3.75 billion, led by stronger gains in equity investments, compared with net losses in the prior year period, and higher fee-based revenues.

The increase in GS stock over the last 4-year period has been far from consistent and has largely been as volatile as the S&P 500. Returns for the stock were 48% in 2021, -8% in 2022, and 16% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could GS face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Goldman has been tweaking its strategy by exiting its money-losing consumer-lending business where it faced high costs relating to customer acquisition and technology development, and intends to focus on its strong suits such as M&A, trading, and wealth divisions. The Federal Reserve’s recent interest rate cuts may also drive an increase in deal making activity, as lower rates make financing transactions more affordable. Additionally, Goldman’s debt underwriting business could see further growth as companies seek to refinance their corporate debt at lower rates.

The company has also been boosting its fee-based revenues for the wealth management business, which could help bring in more stable revenue streams that can offset volatility in its trading and M&A businesses. While the company is moving away from consumer business at large, it is focusing on providing services to other companies that cater to retail consumers. For instance, Goldman offers investment portfolios to customers of the robo-advisory company Betterment in exchange for a fee. We value Goldman stock at $486 per share, which is below the current market price. See our complete analysis of Goldman Sachs valuation for a closer look at what’s driving the company’s value and how it compares to peers.