Thursday, February 18, 2010

"Goldman Sachs: 1Q10 Weakening, Cutting to Street-Low - Macquarie" (GS)

A 'tell' for the overall market? In very early pre-market trade the stock is down .36% at 156.70.
From Notable Calls:
Macquarie Equities Research is out with a very interesting call on Goldman Sachs (NYSE:GS) saying their mid-quarter analysis of market conditions lead them to the conclusion that Goldman’s sequential improvement in 1Q10 will not be as robust as originally expected. Concerns over sovereign debt, potential antibusiness actions by the US government and China’s attempts to cool growth have conspired to slow the recovery in global capital markets activity.

- Lower Top-Line Expectations. As a result, the firm now expects Goldman’s revenue to increase just 1% sequentially vs our prior forecast of a 16% gain. They expect investment banking to fall 27% to US$1.2bn from robust 4Q09 levels (vs their prior -9% delta). They expect equity trading/commissions to rise just 8% to US$2.1bn (vs 34%). Macquarie now sees principal losses (US$602m) vs gains (US$350m).

- One Lone Bright Spot. One area where they are boosting expectations is FICC; they have long expected activity to rebound from weak 4Q09 levels, but the firm now sees FICC up 39% sequentially to US$5.5bn (vs 30%). Increased concern in the debt markets is helping volume, volatility and risk premiums....MORE
...Notablecalls: This is probably the first time for me to highlight any research from Macquarie, so welcomes are due. Macquarie has started covering many of the U.S. names over the past year or so and while they don't get much attention yet, this may be changing.

The Goldman call may serve to be a kind of a wake-up call for many - Q1 is off to a slow start. I suspect most market participants have accustomed to receiving only good numbers from Goldman.

Today, Goldman is facing a lot of pressure. Wherever injustice was done, Goldman has been involved.

At some point Goldman is going to end up with egg in their face.

Would not be surprised to see the stock trade down on this Macquarie call, once it gets circulated.

Not a conviction call on my part.