Goldman: What Have You Done For Me Lately

Remember when Goldman Sachs (GS) was considered the cream of the crop in the Financial sector and could do no wrong?  After avoiding the subprime mortgage crisis, Goldman Sachs justifiably cemented its reputation on Wall Street that it was the most adept trading firm on the street.  But just like everything else on Wall Street, investors may have taken this line of thinking to extremes.  Suddenly, it seemed that any time Goldman Sachs put out a research report,  the call made headlines regardless of what the specific analyst's record was.  When one of their analysts said oil could hit $200 in the not too distant future, rather than question the analyst's thesis as to what besides a rising price justified the increase in his target (which had been $95 in December), investors just wanted to know when.

Recently, sentiment on Goldman Sachs (GS) has turned negative, as more and more analysts are questioning its King Midas reputation.  In our weekly look at analyst earnings estimate revisions for Bespoke Premium subscribers, Goldman Sachs showed up on the list of stocks with the most negative estimate revisions.  In fact, of all the stocks in the S&P 1500, the only two stocks with more negative earnings revisions than Goldman Sachs (GS) are retailers Abercrombie (ANF) and American Eagle (AEO).

Interestingly, just as analysts were the most bullish on Goldman when the Financials were at their worst, it seems they are now turning on Goldman just as their outlook on the rest of the sector starts to improve.  The red line in the chart below shows the net earnings revisions on a percentage basis for the Financial sector throughout 2008.  While analysts are still lowering estimates for more stocks than they are raising forecasts for, there has been a steady improvement over the last few weeks.

click to enlarge

Comments

[Cecil:]

What a weak argument! The chart shows that analysts were raising estimates for the financial sector all year long, until late June. Credibility anyone? So, to argue that Goldman is in trouble because these wrong-headed analysts have turned against them is very weak, indeed.

2008 Aug 29 02:54 AM

[ptolaw:]

At 160 GS remains overpriced! In the past month or so I sold it short @188+ and recently covered at 157, nice cash. Even though I believe its a 90 dollar stock at best in the not so distant future, I covered because all the wall street types and GS's market makers will once again try to resusatate this mortally wounded stock. Look out below.

2008 Aug 29 03:26 AM

[Big Al45:]

Goldman's too well connected to suffer. Paulsen and all of their alumni will make sure that Goldman profits will increase by acquiring assets from the other failed banks at fire sale prices.

2008 Aug 29 02:50 PM