GOLDMAN SACHS and the 4th Quarter of 2019

As Earnings season is kicking off again, focus is on the Banks’ reports this week. JP Morgan, City Group and Wells Fargo published their Q4 2019 reports yesterday before the US market open. JP Morgan and City Group beat expectations strongly, whilst Walls Fargo missed and saw its shares falling over 4% right after the report.

Today, investors’ attention is on whether Bank of America and GS will follow JP Morgan’s success story.

Goldman Sachs is scheduled to release its Q4 and full-year 2019 results before the US market open. In Q3 2019, the bank beat revenue forecasts but missed in earnings, while it posted a decline in Revenue and earnings in comparison with the previous quarter, affected by weakness seen in Investment Banking and Lending. Overall, in the past 2 years it has beaten earning and revenue estimations 88% of the time.

GS , in an attempt to improve its profitability and stock performance, has proceeded with several changes and several restructure and expansion plans for the near future and also the next 5 years. One of their latest projects, which was launched in August, was the development of credit cards with Apple, while they also introduced a long-awaited app last week (January 8), which according to Reuters, ” will integrate with the financial giant’s digital bank, Marcus”. Marcus is Goldman Sachs’s consumer banking unit, which was founded by Goldman Sachs in 2016, named after the bank’s founder Marcus Goldman.

In the long term meanwhile, GS has focused on its request to the China Securities Regulatory Commission (CSRC). As the China Morning Post stated, GS is one of the US banks which has an official branch in China and has been applying to the China Securities Regulatory Commission (CSRC) since last August to take majority control of its venture known as Goldman Sachs Gao Hua Securities, seeking to raise its stake to 51% from 33%. The hiring push on the mainland is part of the US bank’s new five-year plan in which Chief Executive David Solomon is looking to improve its profitability and share price performance.

It will be interesting to see whether all the above expansion plans will affect the bank’s earnings report today, but also how they could expand its wealth management business and broaden its revenue streams in 2020.

Zack’s estimates for Q4 Earnings are:

EPS Estimate: $5.20

Sales Estimates:

  • Low: 8.70B
  • High: 8.82B
  • Year over Year Growth: 8.37%

Earnings Estimates:

  • Low: $4.54
  • High: $5.42
  • Year over Year Growth: -13.91%

Technical overview:

The monthly chart shows the free fall seen on GS shares in 2018 to $151.60 from its all-time high in March 2018 at $275.60. In 2019, shares managed to recover by nearly 78%, as the price moved successfully to $274.64.

However, in the Daily chart, momentum indicators suggest that positive bias is starting to lose some ground , with OBV indicator unable to move further to the upside, suggesting nearterm weakness. The asset price is still moving upwards, however it’s moving outside the upper Bollinger Bands area, with RSI crossing above 70, both suggesting that the asset looks overbought. This comes in line with OBV. Hence from a technical perspective a correction could be seen in the medium term as the asset is overbought.  From the data perspective, positive bias could theoretically strengthen if the upcoming earnings report beats expectations.

Resistance levels: $249,  $261, $275

Support levels: $236,  $227, $214

 

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Ahura Chalki

Regional Market Analyst

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