Dick Bove Puts a Stop to Goldman’s Intra-Day Rally
Goldman Sachs (GS-NYSE) and mighty Stifel Financial Corp. (SF-NYSE) might be the only Sellside firms left standing, but if Dick Bove has his way, soon there will only be one.
Stifel's thinly traded stock is printing new 52-week highs, which Lloyd Blankfein and his minions can only reminisce about. Mid-day Monday Bove took a hatchet to his Goldman estimates, throwing cold water on a rally in the banks & brokers as the Financial Select Spyder ETF (XLF-AMEX) just as they tried to challenge their recent highs:
Ladenburg Thalmann analyst Richard Bove on Monday reiterated a "sell" rating on Goldman Sachs Group Inc. and cut his full-year profit estimate on the investment bank, citing dwindling revenue sources.
For the fiscal year ending November 30, Bove now expects earnings of $14.16 per share, down from a previous estimate of $15.45 per share.
Analysts polled by Thomson Financial, on average, anticipate earnings of $16.77 per share in 2008.
"Business has dried up," Bove wrote in a note to clients. "Key drivers of revenue such as investment banking, and mergers and acquisitions have simply not been happening enough to stimulate related business." FBN
Yes, mighty Goldman has shrinkage, and the deal calendar is barren. Dried up, indeed. Perhaps cross border M&A activity will pick up if the dollar continues to rally, as foreigner who have been on the fence strike before the dollar strengthens further, if they believe so. Possible, but it would only provide a brief respite.
And now Bove is even knocking two engines of Goldman’s recent performance, asset management and commodity trading:
Prime brokerage and foreign activity have also faltered. What’s more, Bove said he expects performance fees from the asset management division to wane.Currency and commodities trading have prospered, but they are not enough to offset the other declining business segments, said Bove, who maintained a $154 target price on the stock.
“At the moment, the light at the end of this tunnel is very dim,” Bove said. “In near term, a turnaround in the company’s earnings is not in prospect.”
Although traders were quick to pummel Goldman’s stock after the call, tbe BuySide really does not care what Dick has to say about Goldman. It is a decent hiding place, and they will continue to seek refuge in the stock until financials are deemed fit to own, as opposed to rent.
The stock is sure to underperform when the tape get jiggy but the flipside is that you can sleep at night if it is on your sheets.
Still, the stock bores me. More intrepid traders might have been laying out shorts in peer Morgan Stanley after the bell Monday. A host of issues, from a Moody’s downgrade to Auction Rate issues should check the recent advance in Morgan’s stock when trading resumes Tuesday.
MS has closed higher than its opening price on ten consecutive trading days, leading me to believe they scored a huge prop trading win in the energy pits. Mere speculation on my part, but the advance has been a bit suspicious. The volatility in the energy pits in July created opportunities, as the numbers posted by infamous trader Brian Hunter and others show.
Did Goldman miss the trade while Morgan Stanley nailed it?
Perhaps. But John Mack’s firm might be a good short for a quick trade to the low $40’s as sellers take profits after a ten day run. No position here, but if there is a decent bid to hit at 8AM EST I am on it before I blow out to Ditch Plains for the day.
The woes Bove lays out for Goldman are true for the rest of the peer group, and if the faders market continues the brokerage stocks could pull back a bit heading into peak vacation season on Wall Street.
________________________________________________________________
Bove: Goldman Sachs Revenue Dwindling
Fox Business
-----------------------------------------------------------------------------------------------------------------------
The content contained in this blog represents the opinions of underthecounter. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position
