Analyst Note| Michael Wong, CFA, CPA |
Goldman Sachs reported record results in the first quarter of 2021, and results could take a while to normalize lower. The company reported record quarterly earnings to common shareholders of $6.7 billion, or diluted earnings per share of $18.60, on a quarterly record net revenue of $17.7 billion. The company also had record investment banking revenue of $3.8 billion, record asset management segment revenue of $4.6 billion, record consumer and wealth management segment revenue of $1.7 billion, and record assets under supervision of $2.2 trillion. Annualized return on tangible equity for the quarter was also 32.9%. We don’t expect to make a material change in our $269 fair value estimate for Goldman Sachs from this quarter’s results. However, we are considering decreasing the cost of equity that we use in our model to 10% from 11%, which would increase our fair value estimate for the company by about 10% to a little over $300. The decrease in our cost of equity assumption would be predicated on the firm building up its more stable investment management and consumer banking businesses.