David Prince
US Equity/Options Fund Manager, Mentor at T3 Live
Goldman Sachs' compressed valuation and tempered expectations improve its risk/reward. After a 20%-plus sell-off, its forward P/E is in the low-to-mid 12s, and management has cooled expectations for FICC and expenses. A positive earnings reaction Tuesday has room if equities deliver, the backlog stays healthy, or expenses are better than feared. x.comÂ
Goldman Sachs's meager roughly 4.8% implied earnings move and past positive reactions make a relief bounce plausible after a 25% slide. Long seen as a top-tier bank, it is among its peers' worst performers this year; shares rose after 8 of its last 11 earnings reports, including a 9% jump last time that doubled the implied move. Earnings are Tuesday before the open. x.comÂ
Goldman's sharply higher equities-trading revenue and longer-run stock gains make the current drawdown tolerable. The division's net revenue rose 72% to $6.44 billion and drove 77% of Goldman's year-over-year net revenue increase. Despite ugly recent price action, the stock is up 18% over one year and 203% over three years. x.comÂ
Morgan Stanley and Goldman Sachs face a negative multiplier effect as worries about the return on AI capital spending start to be priced into tech. After 18 months of enthusiasm about AI spending returns, CNBC Halftime panelists are now finally concerned about its ROIC. That suggests the concern is being discounted in tech prices, which hurts related areas like brokerages that the show's investment committee has embraced. x.comÂ
S&P 500 stocks look cheap relative to expected earnings as forecasts grow faster than share prices. Forward P/E has fallen below 19, its lowest since 2023 and slightly below its 10-year average, despite the index nearing all-time highs. Goldman Sachs' earnings beat, with net income up 29% year over year, suggests earnings support extends beyond AI. x.comÂ
Goldman Sachs looks set for a major breakout and could catch up to Citigroup after banks broadly reported strong earnings. Goldman and JPMorgan are both working on weekly breakouts; Goldman's daily chart is gappy, so entries near the daily 9 EMA look better. x.comÂ
Private credit and major financials, including Ares, Carlyle, KKR, Blue Owl, Blackstone, JPMorgan and Goldman Sachs, are in the doghouse over a risk the market fears more than the Iran war. Anthropic's Dario Amodei has said something similar, and more and more companies are letting people go. x.comÂ
JPMorgan looks remarkably cheap against nearly every other bank despite being the best of them. Its forward P/E looks to be around 13. x.comÂ
Bank negativity may be priced in for Goldman Sachs, Morgan Stanley and Bank of America; stable credit and an active deal pipeline could bring relief. Goldman and Morgan Stanley are down about 14% in three months and sit 22% and 17% below their highs, respectively; Bank of America lost 13% in a month. x.comÂ
Banks' weak response to earnings despite low expectations warrants caution into the rest of Q3 reporting. JPMorgan, Wells Fargo, Citigroup and Goldman Sachs all fell after mixed results, while the bank ETF also declined. x.comÂ
JPMorgan is buyable on pullbacks to its daily 9-period moving average ahead of an earnings run-up in early July, with financials such as Goldman Sachs, Citigroup, Interactive Brokers and Bank of America doing great. x.comÂ
