Goldman Sachs Rating Lowest Ever in Calm-Market CasualtyMichael P. Regan
The big trend among the young and restless in New York this summer is to bash Goldman Sachs Group Inc. interns on Yik Yak, an anonymous social-media app. The big trend for analysts covering Goldman is to bash the stock.
The average rating on Goldman Sachs shares has fallen to 3.21, according to data compiled by Bloomberg that assigns a score of 5 to ratings of buy or the equivalent, 3 to holds and 1 to sells. Apart from some similar scores earlier this year, Goldman’s rating has never been lower in data starting in 2006.
Here’s a sample of the ribbing the summer associates are taking on Yik Yak: “GS interns clap when the plane lands.” Here’s a sample of what analysts are saying about Goldman Sachs: Trading revenue from fixed income, commodities and currencies will drop 16 percent this quarter, according to Sanford C. Bernstein & Co.’s Brad Hintz, who on June 5 cut his second-quarter earnings estimates by 8 percent to $3.35 a share.
The slump in Goldman’s ratings, not to mention the 6 percent drop in its stock this year, is a casualty of the pervasive calm that has overtaken financial markets and sent measures of volatility in various asset classes to multi-year, if not record, lows. Citigroup Inc. has warned of a drop of as much as 25 percent in second-quarter trading revenue and JPMorgan Chase & Co. estimated a 20 percent decline.
As Goldman Sachs President Gary Cohn said at an investor conference last month: “What drives activity in our business is volatility. If markets never move or don’t move, our clients really don’t need to transact.”
Analysts on average predict Goldman’s earnings per share before unusual items will slide 16 percent this quarter, 2 percent next quarter and 9 percent in the final three months of the year before rebounding 8 percent in all of 2015.
Goldman’s 3.21 analyst rating ranks the stock 68th among 83 financial stocks in the S&P 500 and 14 percent below the average 3.72. Banks less reliant on trading revenue are faring better. JPMorgan Chase ranks 11th among financials with a 4.3 rating; Citigroup’s is 4.1; Morgan Stanley and Wells Fargo & Co. are each at about 3.9.
For the entire S&P 500, Goldman’s consensus rating ranks it 440th and 16 percent below the average of 3.84.
While Goldman’s shares outperformed the benchmark stock index by more than 9 percentage points in 2013 and 28 percentage points in 2012, its 139 percent return including dividends is far behind the S&P 500’s 220 percent return and an almost 300 percent jump for financial shares since the start of the bull market in 2009.
You can’t blame the summer interns for that. Even if, according to Yik Yak, they all wait for the light to change before crossing the street.