To The Moon

$Goldman Sachs(GS)$ is expected to release its quarterly earnings for the fiscal Q1 2025 on 14 Apr before the market open.

The consensus estimate for the revenues are expected to come in at $15.16 billion, which represent an improvement of 6.6% from the same period year ago.

The earnings per share consensus have been expected at $12.32 which would be a positive 9.8% change from the same period year-over-year.

Goldman Sachs (GS) Last Positive Earnings Call Saw Share Price Decline By 13.88%

GS last positive earnings call on 15 Jan 2025 saw its share price decline by 13.88%.

The earnings call highlighted strong financial performance in both quarterly and annual results, driven by significant revenue growth, especially in Asset & Wealth Management and financing activities. There was a focus on strategic efficiency and capital returns. However, challenges remain with the Platform Solutions' impact on ROE and ongoing regulatory uncertainty. Overall, the highlights significantly outweigh the lowlights.

Goldman Sachs (GS) Guidance On M&A and IPO

During the Goldman Sachs Fourth Quarter 2024 Earnings Conference Call, David Solomon outlined the firm's robust financial performance and strategic direction, highlighting key metrics. The firm reported Q4 revenues of $13.9 billion and earnings per share (EPS) of $11.95, with a return on equity (ROE) of 14.6% and return on tangible equity (ROTE) of 15.5%. For the full year, revenues increased by 16% to $53.5 billion, EPS soared by 77% to $40.54, and ROE improved by over 500 basis points to 12.7%. Solomon emphasized Goldman Sachs' leadership in investment banking, with a #1 position in M&A advising and a top-ranked equities business, underpinned by $3.1 trillion in assets under supervision in their Asset & Wealth Management division. The firm has also met or exceeded targets from its 2020 strategic plan, with significant growth in revenues from $37 billion to $54 billion and durable revenue streams contributing to 70% of total revenues in 2024.

Additionally, the call touched on the firm's initiatives in efficiency, technology, and regulatory challenges, as well as their strategic focus on capital solutions and private credit markets. Looking forward, Goldman Sachs is optimistic about the potential for increased M&A and IPO activity in 2025.

With the current market volatility dragged by the tariffs turbulence, we could be seeing M&A and IPO activities being paused, this should have a great impact on GS guidance for 2025

Key Factors Impacting Goldman Sachs (GS) Q1 2025 Earnings

Macroeconomic Environment

Interest Rates: Higher rates could boost net interest income (e.g., in consumer banking) but might dampen M&A and IPO activity. Lower rates could stimulate capital markets but reduce lending margins.

Market Conditions: Equity and fixed-income trading revenues depend on volatility and investor sentiment. Strong markets could lift asset management fees.

Business Segment Performance

Investment Banking: A rebound in M&A, IPOs, or debt underwriting would drive growth. This hinges on economic confidence and corporate dealmaking.

Generated Q4 revenues of $13.9 billion, EPS of $11.95, and ROE of 14.6%. For the full year, increased revenues by 16% to $53.5 billion and EPS by 77% to $40.54, with an ROE improvement of over 500 basis points to 12.7%.

Global Markets: Trading revenue may rise in volatile or bullish markets. Commodities, equities, and FICC (fixed income, currencies, commodities) performance will be critical.

FICC financing revenues rose 34% year-over-year, with equities financing revenues up 36%, contributing to a combined record $9.1 billion in financing revenues.

Asset & Wealth Management: Growth in assets under management (AUM) and fee income tied to market performance.

Assets under supervision reached a record $3.1 trillion, marking the 28th consecutive quarter of long-term fee-based net inflows. Management and other fees surpassed $10 billion, exceeding the 2024 target.

Consumer Banking: Success in scaling platforms like Marcus or credit card partnerships, though past challenges (e.g., Marcus’s restructuring) may linger.

Strategic Initiatives

Diversification efforts (e.g., fee-based businesses, transaction banking) could stabilize earnings. Returned approximately $3 billion to common shareholders in Q4, including $2 billion in stock repurchases and $965 million in dividends.

Cost-cutting measures (e.g., headcount reductions in 2023–24) might improve margins.

Risks

Geopolitical tensions, regulatory changes, or a recession could pressure revenues.

Competition in consumer banking and fintech disruption. Platform Solutions, including the Apple Card partnership, was a 75 to 100 basis point drag on the firm's overall ROE.

Concerns over the lack of transparency in the Federal Reserve's stress testing, leading to a lawsuit filed by major U.S. banks, including Goldman Sachs.

Goldman Sachs (GS) Price Target

Based on 16 Wall Street analysts offering 12 month price targets for Goldman Sachs Group in the last 3 months. The average price target is $634.13 with a high forecast of $760.00 and a low forecast of $550.00. The average price target represents a 29.47% change from the last price of $489.80.

As we have heard reports of M&A plan being pushed back, this could cause some impact on GS business which GS have been profiting from these M&A and IPO activities, I am expecting GS to adjust their guidance on the M&A and IPO for 2025.

Technical Analysis - Exponential Moving Average (EMA)

If we looked at how the financial stocks have performed in this volatility market, bank stocks is trying to hold the support, so we can see that RSI is moving up a bit due to increased investors sentiment.

So what GS need would be a bull case where strong capital markets, rate cuts spurring M&A, and disciplined cost management lead to earnings above expectations.

But currently, there is recession fears which would lead to a bear case where economic slowdown, reduced trading activity, and investment banking stagnation result in missed estimates.

So it will be interesting to look at GS peers and how their earnings guidance would turned out.

Summary

I think we might want to compare with peers (e.g., $Morgan Stanley(MS)$’s wealth management focus, $JPMorgan Chase(JPM)$ ’s retail strength) for sector trends.

There might be some surprise but I expect a huge adjustment as we monitor guidance updates and management commentary on earnings calls for strategic shifts.

Appreciate if you could share your thoughts in the comment section whether you think GS would post a modest earnings but give a cautious and adjusted down guidance on M&A and IPO.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.