Goldman Sachs Is 20% Off Its High Into the Oct. 13 Print
The stock sits near $898 at 13.8x trailing earnings. The third quarter report decides if the discount is real.
Goldman Sachs trades near $898 after falling over 20% from its July high. The Oct. 13 print will test whether 13.8x earnings is a real discount.
A bear market in a record year
Goldman Sachs shares opened at $893.52 on Tuesday and traded as high as $898.67 in the session. That is more than 20% below the July high, which technically puts the stock in a bear market. The 52-week range runs from $740.01 to $1,153.99, so the stock sits closer to the top of the band than the bottom, but the drawdown has still cost holders roughly a fifth of their gains.
The odd part is the fundamental backdrop. Second quarter EPS came in at $20.98 against a consensus near $14.47. Revenue was $20.34 billion against roughly $16.22 billion expected, up 39.4% year over year, and net earnings rose 78% to $6.63 billion. A stock does not usually get sold 20% after a print like that unless the market is pricing the peak.
That is the argument now. Investors are asking how much of the record trading and dealmaking can repeat, and the answer is not obvious. The selloff has been a debate about durability, not a reaction to a miss.
What the Q3 bar looks like
Goldman reports before the open on Tuesday, Oct. 13, with the call at 9:30 AM ET. Consensus EPS sits between $13.87 and $15.39 depending on the survey, against $12.25 a year ago. Revenue estimates range from $17.02 billion to $17.42 billion versus $15.18 billion in the year ago quarter.
So the Street is modeling a step down of roughly 26% to 34% in EPS from the second quarter. Q3 is seasonally slower for capital markets, and analysts are haircutting the trading windfall. That is a lower bar than the headline growth rates suggest, and the recent beat history matters here. Goldman cleared estimates by $6.60 last quarter, $1.08 the quarter before, and $2.39 the one before that. Three straight beats, with the most recent one enormous.
I do not have a clean straddle number to hang on this one, so pull the implied move from the [earnings calendar](/earnings-calendar) before sizing anything. For a $898 stock, even a 3% move is $27 a share, and that is a lot of risk for a name that has already lost this much.
The value case holds up on the numbers
At the current price the trailing P/E is 13.8 on EPS of $65.02. The forward dividend is $20.00 a share, a 2.23% yield. For a franchise with net revenue approaching $70 billion, strength across global banking, investment banking, fixed income and equities, and an asset management arm with more than $4 trillion in assets under supervision, that multiple does not price in much growth.
The asset and wealth segment is the stabilizer. Fee income there does not swing with trading desks, which gives earnings a floor when markets get choppy. That is the piece of the story the selloff seems to be ignoring.
Street targets sit well above the price. Consensus targets run from $1,066.60 to $1,150.74 depending on the survey, and the higher figure is 28.1% above Tuesday's trade. Targets lag the tape, so I would not lean on them. The valuation argument stands on its own.
Where the bulls can be wrong
Not everyone is leaning in. UBS cut its target from $1,150 to $1,010 and kept a Neutral rating. Succession chatter around the top of the firm has also been hanging over the stock, and a print is a natural moment for management to say something that moves it either way.
The bigger risk is guidance. If trading revenue normalizes faster than the Street models and investment banking backlog commentary turns cautious, a decent quarter can still produce an ugly reaction. That is the pattern when a stock is selling off on durability concerns. A clean beat gets sold if the forward read is soft.
That is why the setup needs a read on the tape as well as the numbers. Check the [Whale Alerts dashboard](/whalealerts) for how options flow in GS is leaning into the print. A call-heavy lean would back the value thesis. Put-heavy positioning would say the money is bracing for a guide down.
What to watch Tuesday
Three things matter on Oct. 13. First, ROE, which was a focus in the preview chatter and anchors the multiple. Second, the tone on investment banking pipelines, since that is where the second quarter surprise came from. Third, whether any capital return announcement shows up alongside the results.
On the chart, the gap is the read. If GS opens higher and holds the first hour high, the value thesis has a floor. If it fades through the open and loses $893.52, the market is telling you the peak call is winning. Below that, the next reference is the bottom of the 52-week range at $740.01, and that is a long way down.
After Goldman, the other large banks fill out the picture on trading and dealmaking, so the read across the group matters for whether this selloff was company specific or sector wide.