PreMarket Prep Stock Of The Day: Goldman Sachs

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

Sometimes great earnings aren't good enough to instigate a major rally in an issue. That happens to be the case with Goldman Sachs GS, making it the PreMarket Prep Stock Of The Day.

Goldman Sachs made its all-time high in March 2018 at $275.31. At the current price of around $214, it has had a negative return of 23%. Over that same period of time, the S&P 500 index has yielded a return of 123%.

Getting Near All-Time High And Then… After ending 2019 at $229.93, Goldman Sachs was following the market higher in January, reaching $250.46, but retreated to the month at $237.75. It managed to rally to $245.77 in February but cratered to end the month at $200.77.

The issue was not spared in the March meltdown, falling to $133.28 on March 23. That came in just above its January 2013 low of $129.62. Interestingly, that's the exact same day that the S&P 500 index bottomed as well.

While the index swooned 35%, Goldman shed 48% during the market correction.

Participating In The Rally: So far the rebound off the March low for the S&P 500 index ended on Sept. 2, when it peaked at 3,588.21, for a 64% return from trough to peak. The rebound off the March low for Goldman Sachs peaked on March 25 at $225.24 for a return of 72%. At its current level, it still has a return of 61%.

Printing Money Over The Last 8 Quarters: The issue and the Street’s non-appreciation for its earnings reports was discussed at length on Wednesday’s show. For starters, co-host Dennis Dick marveled at the EPS beat for the company ($9.68 vs. $5.57) and the solid revenue beat ($10.78 billion vs. $9.45 billion).

"Think about if this was a technology company," said Dick, "making $10 when the estimate was $5. The thing would be [up] 10, 15 or even 20%. It has been a value trap for a long time. They have made a lot of money over the last six years and the stock has gone nowhere."

Spencer Israel calculated that the company has made $39 over the last eight quarters, which included its second-quarter debacle this year. ($0.53 vs. $3.78). The end result, a forward price/earnings ratio of 8.9 compared to the industry average of 17.

Dick concluded that the firm should come up with some creative “financial engineering” to unlock some of the value in the company overall operations.

The full discussion on the issue from today’s show can be found here:

Price Action: While the issue was being discussed on the show, it was trading at the $213 area. The author of this article noted a firm seller at the premarket high of $217.50 and needed to clear that level for the rally to continue.

After a higher open, it didn't come near that level, only reaching $214.32 and reversed course The ensuing decline found support just under Tuesday’s close ($210.81) at $210.27. As of 1:30 p.m. ET, it has rebounded back into the $214 handle.