Goldman Sachs stock has pulled back in the past few months despite its strong revenue and profitability growth. GS dropped to $949, down by 17.2% from its highest point this year, and is hovering at its lowest level since May 20th. Focus now shifts to the rumored Palmer Square Capital.
Goldman Sachs is leaning on M&A for growth
David Solomon’s Goldman Sachs is doing well, with its revenue growth accelerating. It is benefiting from the ongoing M&A and trading boom, a trend that analysts expect will continue in the near term.
The company is now leaning to acquisitions to boost its revenue growth. It is in the process of acquiring NEOS Investments, a company that runs high-yielding covered call ETFs. It is spending $2.2 billion for this acquisition.
Goldman Sachs also acquired Innovator Capital Management, a move that added over $31 billion in assets. Its goal is to become a bigger player in the ETF industry and a top competitor to JPMorgan, which runs popular funds like JEPI and JEPQ.
It also bought Industry Ventures, a venture capital platform investing across all stages of the VC lifecycle.
Now, there are reports that the company is running to acquire Palmer Square Capital Management (PSCM). PSCM is a top company run by a husband-and-wife team that issues collateralized loan obligations. It has over $37 billion in assets under management.
Goldman Sachs has numerous catalysts
Goldman Sachs’ business is doing relatively well this year, helped by the higher interest rates and the ongoing M&A boom. The Federal Reserve hiked interest rates by 0.25% last week, and officials believe that it will need to hike again.
Goldman has also become as a top player in the investment banking industry. Dealogic data shows that it is the top M&A advisor this year, advising deals worth over $1.44 trillion. It handled $1.02 billion in the same period last year.
Goldman is also the top equity capital markets bookrunner this year, advising deals worth over $81 billion. It ranks as the fifth-largest player in the debt capital market industry.
The most recent results showed that Goldman Sachs’ net revenue jumped to $20.3 billion in the second quarter and $37.57 billion in the year’s first half of the year. Its results were largely positive across all its businesses.
Still, there are signs that analysts expect the stock to remain under pressure in the near term. 56% of analysts tracking the company have a hold rating, while 36% have a buy rating. The average estimate, according to Kyro data, is $681, slightly lower than the current level.
Erika Najarian, a UBS analyst, maintained a neutral rating and hiked her target from $1,120 to $1,150. HSBC’s Saul Martinez hiked his target from $834 to $995, while BMO’s Brennan Hawken slashed his target from $1,190 to $1,150.
Goldman Sachs stock technical analysis
GS stock chart | Source: TradingView
The daily chart shows that the GS stock has slumped in the past few months, moving from $1,148 in July to $950 today. It has dropped below the important support level of $1,000, the neckline of the head-and-shoulders pattern.
The stock has slumped below the 50-day moving average and is in the process of forming a bearish flag pattern. Therefore, the stock will likely remain under pressure in the near term, potentially to $850 and then resume the uptrend.
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