Goldman Sachs Need Investors Interest Back On Top Of Better Earnings
$Goldman Sachs(GS)$ is scheduled to release its first-quarter earnings on 15 April 2024 (Monday) before the market open. Last week, we have seen a string of not so favorable earnings result from its US banking competitors.
GS has also showed some weakness at the end of Friday’s session, dropping 2.01%, and another 1.15% in after hours trading. It seems like it did not manage to get out of the market sell-off impact on Friday (12 April).
Market is expecting GS’s result to be better-than-expected as rising markets boost the firm's wealth and asset management divisions, and deal pipelines. The lucrative fees they collected show that there is signs of picking up after being in a period of muted growth.
GS is expected to report earnings per share of $8.73 on revenue of $12.9 billion. In the year-ago period, the bank reported $8.79 per share on revenue of $12.2 billion.
The stock price might be dampened by the conflict which happened over the weekend, expectation of rate cut have also faded, now investors are looking to seek out safer haven like bonds and defensive stocks.
From the technical analysis, we are seeing investors sentiment declining since beginning of April, there is increased selling strength, from MACD, we are seeing signal declining.
This does not bore well for GS, even though we might see earnings per share comes in better-than-expected, the stock price might still moved southwards, unless investors decide to focus on banking stock to ward off the impact from middle east conflict and the economic data suggesting that rate cut might not be near.
Goldman Sach (GS) Implied Volatility Ahead Of Earnings
GS's last earnings implied volatility (IV30) going into earnings was 22.0. The last time GS released earnings, the implied volatility dropped to 19.8, resulting in an implied vol crush of 10%. 5 days after earnings, the 30 day IV was 19.1.
Average Implied Volatility Crush For GS Earnings: 11%
Average 30 Day Implied Volatility 1 Day Before Earnings: 28.3
Average GS 30 Day IV for the Day of Earnings: 25.4
Average 30 Day Implied Volatility 5 Days After Earnings: 26.2
Goldman Sach (GS) Post Earnings Movement
The options market overestimated GS stocks earnings move 83%of the time in the last 12 quarters.The predicted move after earnings announcement was ±3.6%on average vs an average of the actual earnings moves of 2.4%(in absolute terms).
The option valuation is overvalued which suggest price volatility post earnings, if we were to look at the past 2 earnings in Oct 2023 and Jan 2024 respectively we can observed that the volume built up prior and after earings is important.
In Oct 2023, we saw that there is selling (pretty high) volume before and after the earnings, which cause GS stock price to drop to a new low (below 300) by Nov 2023. Whereas in Jan 2024, we could see that there is pretty balanced buy and sell volume which resulted in sideway stock price move for GS.
Coming to the upcoming earnings, we are seeing Sell volume build up, which could mean investors adjusting their portfolios, I would suggest to continue monitor how investors perceive GS trade today (15 April).
Summary
After going through the banking sector earnings release last week, we could see that most major banks are not spared from last Friday (12 April) sell-off, so what does it mean for a bank to have better-than-expected earnings? Yet the market does not respond accordingly to sentiment and confidence.
I would think technical analysis could help us in finding the trend on how a stock would move before and after its earnings release.
Appreciate if you could share your thoughts in the comment section whether you think GS could get traders and investors confidence amidst the challenges from middle east conflict and economic data suggesting softer inflation?
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
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