Goldman Sachs stock earnings preview: Low expectations

Goldman Sachs (NYSE: GS) stock price was little changed on Wednesday as the bank earning season started. The shares are trading at $321, where they have been in the past few days. The stock has retreated by more than 25% from the highest point in 2021, meaning that it has moved to a bear market. 

Low expectations

Goldman Sachs is a leading investment bank that operates in most developed countries. It is one of the most prestigious companies in the US. It operates in several businesses, including wealth management, investment banking, global markets, and consumer. 

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The Goldman Sachs stock price has been under pressure in the past few months even as the Fed and other central banks have embraced a more hawkish tone. It has already raised interest rates by 0.25% and officials have committed to deliver at least six more rate hikes this year. 

In theory, higher interest rates should be positive for banks like Goldman Sachs. However, the stock has declined mostly because the higher interest rate regime was priced in by the market.

The GS stock has moved to a bear territory because of a sharp decline in dealmaking activity as regulatory concerns remain. Indeed, the number of deals that have been this year has been sharply lower. In its report on Wednesday, JP Morgan said that dealmaking revenue dropped by 31% from a year ago. 

According to FT, deals worth $1 trillion were made in Q1, sharply lower than in the previous year. Goldman Sachs is more exposed to this slowdown because of the volume of revenue that it makes from deal-making.

Analysts expect that Goldman Sachs revenue declined to $11.8 billion in the first quarter from the $12.64 billion it made in the previous quarter. In Q1 of 2021, the company had over $17 billion in revenue. At the same time, analysts expect that its profitability also declined sharply.

Goldman Sachs stock price forecast

The daily chart shows that the GS share price has been in a strong bearish trend in the past few days. The sell-off accelerated when it moved below the important support at $370. The shares have moved below the 25-day and 50-day moving averages while the Relative Strength Index has fallen. Therefore, there is a likelihood that the stock price will rebound since the bad news have already been priced in.

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