The Goldman Afternoon
Great Ones, you can learn a lot of things from Wall Street banks, especially in the quarter ending in June. There’s a wealth of lowered expectations, all in the Goldman afternoon.
Y’all remember that song from Disney’s Alice In Wonderland?
Things are certainly getting curiouser and curiouser on Wall Street, and Goldman Sachs’ (NYSE: GS) earnings report isn’t helping matters for me at all. In fact, this quote from Alice pretty much sums up my thoughts on Goldman’s results and Wall Street’s reaction:
Am I being too harsh? You tell me:
• Earnings per share: $7.73 versus $6.58 expected.
• Revenue: $11.86 billion versus $10.86 billion expected.
Now, on the surface … those results look absolutely amazing. I mean, Goldman beat earnings by $1.15 per share and revenue by … one billion dollars.
(Anyone else getting Austin Powers vibes here?)
The thing is … if you look more closely at Goldman Sachs’ report, you notice that it’s not Goldman that made these numbers look great. It’s Wall Street analysts.
Yes, Goldman earned $7.73 per share, but those results plummeted a whopping 48% from last year. Furthermore, revenue was $11.86 billion … but that was also down 23% from year-ago results.
And then you have this statement from Goldman CEO David Solomon:
With a statement like that, investment returns must have been amazing and assets under management must have soared, right?
According to Goldman’s report, investment banking revenue dropped 41%, while asset management revenue cratered 79% from 2021 results.
I have to say, Great Ones … that’s impressive.
If you had just left your money in the S&P 500 Index during Q2, you would have only lost 16.4%. Goldman managed to more than double that loss on investments.
But, once again, it’s the Wall Street analyst crowd to the rescue. Goldman’s $2.14 billion in investment banking revenue and its $1.08 billion in asset management revenue beat analysts’ expectations.
It’s good to be the king, I guess.
And if you’re wondering about guidance, Goldman had this to say:
So, let’s recap… Goldman’s profits fell 48%. Its revenue fell 23% — how do you miss by $1 billion, analysts?
Meanwhile, guidance is questionable.
What does GS stock do? Why, it rallies more than 4%.
I’m not a big fan of investing in banking giants, but if I were to buy a financial sector stock … it would be Goldman Sachs. Wall Street clearly takes care of its own. It’s good to be the king.
You can learn a lot of things about the flowers … erm, banks … indeed!
But You Can Learn Even More From Mike Carr … Indeed!
Have you seen Mike’s new Greed Gauge yet?
Not only could it have predicted losses as great as 80% during the Covid crash, but rigorous back testing shows it could have returned gains as high as 775% in 31 days or less.
Eat that, Goldman Sachs.
Even better? Mike’s got 20-plus years of trading data to prove that his new strategy would have also delivered profits in seven of the last nine market downturns!
The Good: Delta’s MAXin’, Relaxin’ All Cool
Boeing (NYSE: BA)? In today’s “Good” spot?!
It’s more likely than you think — and you have Delta Air Lines (NYSE: DAL) to thank for that.
Delta just ordered 100 737 MAX 10 planes from Boeing, with the option for up to 30 more planes should the desire arise. We’ve all been there, right? Pssh, just last month, I thought I needed 89 jets, but this week I wish I bought all 130. Duh.
Anyway, the new planes will help update Delta’s decrepit fleet, and it’s the company’s first order to Boeing in over a decade. The deal comes out to mere pocket change of $13.5 billion, and that’s if Boeing doesn’t offer up any discounts for the bulk buy.
Maybe if Delta bought from Boeing more often, it could have a frequent shopper punch card, but that’s another story for another time.
For you Boeing investors out there in Great Stuff Picks, you know the deal: The more sales for Boeing, the better — and sizeable sales such as this one, even better!
Unlike every other time Boeing lands in our “Good” spot, BA stock rose on the positive news, ending the day up 2%.
The Bad: Web? What Is This, 2006?
Let’s take a lil’ trip back in time — take you waaaay back to the early 2010s. The social media landscape was … different, we’ll say.
Snapchat just launched, letting you send pics and messages you’d be too embarrassed to actually text … seeing as how Snaps disappeared after a few seconds. College kids and young adults rejoice in a way to $@!%-post memes and document your usual party shenanigans. Make of that what you will.
But now? It’s 2022. Snapchat parent Snap (NYSE: SNAP) is a public, unprofitable company that’s really trying hard to take itself seriously. Go figure. And in its bid to somehow “transform” into a Gen Z-branded social media platform that’s also profitable … Snap is getting flat-out desperate.
Last week it was NFTs — but not just any NFTs, no. These are augmented reality NFTs, so that way you can see your life through the literal lens of … content creator NFTs? Yeah, sure, I bet it’ll work out.
This week, though, Snapchat’s turning the time machine dial back to last decade — if not earlier — by introducing a web app. Soon you’ll be able to use Snapchat on your desktop to chat and video call — just like it’s 2011 all over again.
Your guess is as good as mine. We’ll see how Snap’s latest venture fares next time earnings rolls around, but I won’t hold my breath.
Remember when SNAP dropped 40% the morning it lowered guidance? And everyone was like: “Oh whoopee, here I go selling off all my social media stocks.” Snapchat, Facebook, Twitter — you name it. Gone, goodbye.
But here’s the problem. As easy as it is to hate on, well, anything to do with social media stocks, not all social media stocks are made equally. Some were made worse, like Snapchat. Some social media stocks have legit, revenue-generating income streams. And then you have Snapchat.
See, it’s because Snapchat never learned how to monetize its young audience’s meme-laden tomfoolery that the platform’s trying to be everything it thinks investors and users both want.
Seriously, a web app? Desktop video calling? Are you trying to be Zoom now too?
The Ugly: Fast Track To A Short Cliff
Riddle me this, Great Ones: How do you spot a scared Elon Musk?
I’ll play your silly games. How?
Like so: Musk’s attorneys have asked the court to reject Twitter’s (NYSE: TWTR) plea for a speedy trial. Twitter, for its part, wants to go to court as soon as September. But Elon Musk wants more time for … reasons?
According to the filing on Friday, Musk alleges that Twitter made a “sudden request for warp speed after two months of foot-dragging and obfuscation.” He also claims that this was Twitter’s “latest tactic to shroud the truth about spam accounts.”
Now, is it just me or was Elon the source of most of said foot-dragging and obfuscation? The bad faith Twitter spats. The back-and-forth over giving up due diligence. The poop emoji. If Elon actually is trying to get out of the deal, he’s not hiding it well. Like, at all.
In fact, while this delay-that’s-not-a-delay is today’s ugly … the real ugliness might be yet to come for Elon. And that’s not to mention what pain is in store for Tesla (Nasdaq: TSLA) investors, who will be left on the sidelines going “what the frick, man” as Elon sells TSLA shares to fund all this nonsense.
Ugly, ugly, ugly, indeed.
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