Bull Of The Day: Goldman Sachs (GS)
Goldman Sachs GS has solidified itself as the gold standard on Wall Street, navigating the choppy pandemic waters with a level of operational perfection that no other major financial institution could match. Following the recent valuation compression, GS is poised to take flight in 2022 and is one of my top picks going into the new year (with many other investment professionals in agreement).
Sell-side analysts are getting increasingly optimistic about the future of Goldman Sachs, pushing up their EPS estimates after a blowout Q3 report, propelling GS into a Zacks Rank #2 (Buy).
The Opportunity
Goldman seized on the opportunities that each stage of the devastating pandemic presented. GS drove record trading profits from the market capitulation of March 2020, attained excellent portfolio returns for its high wealth thereafter, and has been one of the biggest beneficiaries of the record IPO & M&A frenzy we've seen over the past 12 months or so (and this dealmaking euphoria is expected to spill into 2022).
This global investment leader has demonstrated its ability to effectively adapt to the continuously evolving financial conditions as we enter the digitally-fueled Roaring 20s.
Goldman's Q4 earnings release is on the top of the 2022 January docket, with its full year report expected to be released January 18th (before the opening bell). In the past 6 quarterly releases GS has knocked analysts' consensus EPS estimates out of the park by no less than 50% (averaging 66%) while exceeding revenue expectations by an average of roughly 30%.
Despite analysts ' seemingly perennial upward estimate revisions, I see no reason this outsized estimate beating trend wouldn't continue in 2022 as rising interest rates expand Goldman's already record margins even further.
Strong Fundamentals
Goldman Sachs is the captain of high finance and the banking sector's knight in shining armor. The firm is known for its quick opportunity seizing trading actions and best-in-class investment banking operations. A record volume of IPOs, bond offerings, and M&A activity have powered this business's top and bottom-line to incredible levels that have consistently blown analysts' estimates out of the water.
David Solomon has proven himself at the helm of this remarkable Wall Street titan, driving top and bottom-line results that have dwarfed any pre-pandemic figure. Since Solomon was named CEO and Chairman of Goldman Sachs on October 1st, 2018, GS shares are up over 60%. This may not sound like a lot, but GS has navigated the 2018 year-end sell-off and the most significant economic contraction since The Great Depression.
GS had a premier year with an over 60% 10-month year-to-date rally, which peaked at the beginning of November, but a recent correction from that high has presented us with an excellent entry point. The cushy 2.1% dividend yield that this stock offers its shareholders, should provide even the most risk-averse investors with the comfort to add this investment leader to their portfolio's financial holdings.
The dealmaking king is looking at a consensus price target north of $450 a share (some targets as high as $600), with analysts getting increasingly bullish on a seemingly weekly basis. 11 out of 16 analysts are calling GS a buy today with 0 selling ratings.
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