Goldman Sachs stock price outlook: Rating downgrade

Goldman Sachs (NYSE: GS) stock price sell-off gained steam after a number of important news about the beleaguered company. The shares plunged to a low of $320, the lowest level since July 11th. It has slipped by over 11% from the highest level this month, underperforming other big US banks like Morgan Stanley and JP Morgan.

GS challenges remain

Goldman Sachs is going through several challenges that puts the company at risk. The most important issue is that the bank’s move to mainstream customers is not working. As a result, the company is exiting some of those initiatives at a big loss. 

For example, it is selling Greensky, a company it bought in 2021, taking a hit of over $2.1 billion. Now, the firm is considering selling its investment advisor business, which it bought for $750 million. 

This performance shows that David Solomon, the CEO erred in his strategy despite his multi-million dollar salary. He earned $25 million in 2022 and $35 million in the previous year.

At the same time, Goldman Sachs has lost several high-ranking officials. Most recently, it lost Jeff Currie, the head of commodities research. Currie accurately predicted the commodities supercycle and was one of the most visible people in the industry.

Most importantly, Goldman Sachs has trailed its historic rivals like Morgan Stanley and JP Morgan. These firms have pivoted to wealth management, a lucrative venture that has supported them during the deal-making drought. 

Data shows that Goldman Sachs’ metrics are a bit weaker than other companies. For example, its most recent results showed that its revenue dropped by 11% while Morgan Stanley’s and Citi’ fell by 6.7% and 1%, respectively. 

Additionally, Goldman Sachs return on equity (RoE) of 7.50% was lower than JPM’s 15% and Morgan Stanley’s 9.98%. Therefore, I believe that Goldman’s turnaround will take a longer period to conclude than expected.

Goldman Sachs stock price forecast

The daily chart shows that the GS share price has made a bearish breakout in the past few weeks. It retreated below the important support level at $347, the highest point on June 14th. The stock has also dropped below the 200-day and 50-day moving averages while oscillators have pointed downwards.

Therefore, as we saw with Credit Suisse, implementing a turnaround is a long and tedious process. And with the drought in deal-making continuing, I believe that the shares will likely take long to bounce back. I suspect that the shares will move below $300 soon. This view will be confirmed if it drops below the support at $311.