NEW YORK, NEW YORK – JUNE 12: Goldman Sachs CEO David Solomon speaks with Forbes CCO Randall Lane … [+]
Goldman Sachs’ stock (NYSE: GS) has gained approximately 4% YTD as compared to the 18% rise in the S&P500 index over the same period. Further, at its current price of $356 per share, it is trading 2% below its fair value of $363 – Trefis’ estimate for Goldman Sachs’ valuation. The investment bank posted mixed results in the second quarter of 2023, with revenues topping the consensus but earnings missing expectations. It reported total revenues of $10.9 billion – down 8% y-o-y, primarily driven by a 14% drop in the global banking & markets (which include investment banking and sales & trading) and a 4% decline in asset & wealth management. Notably, the asset & wealth management unit mainly suffered due to lower equity and debt investment revenues. That said, the top line was somewhat supported by a 92% jump in the platform solutions segment. On the cost front, the expenses figure increased by 12% y-o-y. Overall, the adjusted net income was reduced by 62% y-o-y to $1.07 billion.
The bank’s top line decreased 7% y-o-y to $23.1 billion in the first half of FY 2023. It was primarily due to a 15% drop in the global banking & markets division – investment banking and FICC (fixed income, commodity, and currency) trading declined by 24% and 21%, respectively. However, the negative impact was somewhat tempered by an 8% growth in asset & wealth management, followed by a 100% jump in the platform solutions. On the expense front, the operating expenses for the first half witnessed an unfavorable increase of 10% y-o-y. Altogether, the adjusted net income fell by 37% y-o-y to $4.2 billion.
Moving forward, we expect the same trend to continue in Q3. All in all, Goldman Sachs revenues are forecast to touch $43.56 billion in FY2023. Additionally, GS’ adjusted net income margin is likely to decrease from 22.7% to 20.8%, leading to an adjusted net income of $9.1 billion. This coupled with an annual EPS of $26 and a P/E multiple of 14x will lead to a valuation of $363.
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