Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

WSJ Reiterates Q4 Loss Potential for Goldman Sachs (GS)

Posted on | December 2, 2008 Time: 9:12 am |

An article in this morning’s WSJ is confirming what Reuters first reported a month ago - that Goldman Sachs is likely to report its first ever loss as a public company in the current quarter.

While today’s article is apparently quite soundbite-worthy in the mainstream press, if anything the report has narrowed the range of losses predicted for the former investment bank. Reuters first pegged the losses, to come from asset write-downs, to be as high as $5 billion. Today’s report now has the range between $3 and $4 billion.

The latter range is right around where I estimated Goldman’s Q4 losses to be on November 1. Betting on big write-downs has only become easier in the past month, as Goldman’s stakes in commercial real estate and Chinese equities have taken a known beating.

Let’s Join the Market in Finding Perspective

GS shares are down less than 1% on the day, a clear sign that the markets have largely discounted this news already. More to the point, GS shares are down about 30% since the Reuters article first hit the wires a month ago. The medicine has already been taken, and even if Goldman reports a $2-$3 net loss in Q4, annual EPS will still be above $12, and the earnings multiple will remain below 7.

The biggest driver of Goldman’s share price over the next 6 months will continue to be the market’s expectations for further financial blowups or other systemic/tail risks to the global economy.

Ryan Barnes

  • Share/Bookmark
Category: Financials, Fundamental Analysis
Tags: > > >

Comments