Goldman Sachs looks poised for a breakout

Key Points

• GS has returned a modest 4.84% over the previous year and an impressive 18.39% in the last three months, outpacing the sector's return of 15.39%.
• Analyst sentiment is bullish, with a "moderate buy" rating and a consensus price target indicating nearly 6% upside potential.
• GS reported a significant increase in earnings for the fourth quarter, driven by a 7% rise in companywide revenue to $11.32 billion, led by asset and wealth management growth.

The Goldman Sachs Group NYSE: GS is one of the most-followed stocks and has long been an industry leader and at the forefront of innovation in the banking and financial sector. 

The company, which boasts a market capitalization of $126.49 billion, is a Dividend Aristocrat with a 2.84% dividend yield and moderate dividend strength. Offering a stable dividend yield and a P/E of 17, the stock is no stranger to value, long-term conservative investors.

The company's stock has returned a modest 4.84% over the previous year without considering its dividend yield. However, in more recent times, over the last three months, it has returned an impressive 18.39%. A return significant enough to see it outpace the overall sector, which has returned 15.39% over the same period. 

With earnings out of the way and the stock displaying recent relative strength to its sector, might GS be a top financial play for the remainder of the first quarter? The stock warrants a closer look due to the recent outperformance and based on how it has formed in terms of technical analysis. As GS's bullish consolidation has formed, let's see if a breakout might loom for the financial giant. 

Goldman Sachs tops earnings expectations

On January 16, Goldman Sachs reported its fourth-quarter results that beat analysts expectations. The company reported a significant increase in earnings for the quarter, with a 51% jump to $2.01 billion, or $5.48 per share, compared to the previous year. 

A rise in companywide revenue drove this growth, which increased by 7% to $11.32 billion. Despite facing challenges in the past year, CEO David Solomon is optimistic about the future, especially with a focus on the asset and wealth management division, which saw a 23% increase in revenue. 

While some divisions met or slightly missed expectations, equities trading performed well, offsetting a decline in fixed-income trading. According to Solomon, investment banking fees fell, reflecting a broader industry trend, but there's hope for a rebound in mergers and capital markets activity in the latter half of 2024.

GS is trading in the high-end of its range

Shares of Goldman Sachs are now trading at the high end of its 52-week range, last trading at $287.86. Notably, the stock has spent over a month consolidating in a tightening range, with support now at $380 and resistance near $390. 

As the stock consolidates above a rising 200 and 50-day simple moving average (SMA), the trend is firmly to the upside.

Participants and those looking for potential momentum continuation should closely monitor the price action near resistance. A break and hold above short-term resistance and an uptick in volume might confirm a breakout and momentum shift. 

The sentiment is bullish 

Based on 17 analyst ratings, GS holds a "moderate buy" rating with a consensus price target indicating a nearly 6% upside potential. Notably, this rating is more favorable than the current consensus rating for finance companies, which is "hold," and the overall S&P 500 consensus, which also stands at "hold."

Following its fourth-quarter results, many analysts took action on the name. Namely, Oppenheimer boosted its target from $491 to $506, calling for an impressive 30.83% upside at the time of the report. 

Morgan Stanley upgraded its rating for GS from "equal weight" to "overweight" and boosted its target from $333 to $449. The high forecast on GS is now $506, thanks to the upgrade from Oppenheimer. The low forecast is $351, a price target Atlantic Securities gave in August last year.