Goldman Sachs (GS) shares were trading flat Tuesday morning even after the bank beat earnings and revenue expectations and raised its dividend. The stock actually sold off immediately after the results were released, indicating traders were not keen on the details in the report.
One reason for the stock’s weakness may be that Goldman’s trading results didn’t stack up very well against its competitors. In particular JPMorgan Chase (JPM) saw its core Fixed Income Currencies and Commodities (FICC) trading fall 4% year over year, while Goldman’s fell 16%, according to Citi analyst Keith Horowitz. Overall, Goldman’s FICC revenue fell 20%, while JPM’s fell 11% and Citigroup’s (C) fell 4%.
But Horowitz sees an opportunity in the stock’s weakness.
“GS shares may be weak today on disappointing FICC, which we see creating a buying opportunity. Note that a lot of the strength for the industry in 1Q was driven by mark-ups on the trading side, rather than robust flows. Goldman�s VaR [Value at Risk, a measure of a portfolio's riskiness] also points to less risk-taking in 1Q (VaR fell 30% vs 4Q), which we believe reflects both the impact of much lower volatility in 1Q plus no significant increase in risk-taking as GS has been downsizing risk over the past year.”
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