Goldman Sachs Falls 20% From Record High and Enters Into Bears Market. How to Play GS Stock Here.
Goldman Sachs (GS) just slipped into a bear market, but its latest earnings report hardly looked bearish. Shares closed at $902 on Friday, more than 21% below their July record of $1,153.99. That decline has investors asking whether the selloff is finally creating an attractive entry point or signaling that the bank’s earnings boom is starting to fade.
The question got more complicated by Goldman’s latest quarter. The bank reported $20.34 billion in second-quarter revenue, beating the $16.22 billion estimate, while EPS of $20.98 crushed the $14.47 consensus. Revenue surged 39% year over year, and net earnings reached $6.63 billion.
More News from Barchart
So, Goldman is not falling because the business suddenly broke. Investors are looking ahead and wondering whether those record results can be repeated.
Goldman Sachs Stock Has Lost Momentum
Goldman shares are still up roughly 2% year to date, but the recent performance has been much weaker. The stock is down about 12% over the past three months, as investors have become more cautious about trading revenue, rising expenses, and the sustainability of the dealmaking boom.
That was after CEO David Solomon predicted that fixed-income, currency, and commodities trading may be a bit cooler in the third quarter. He also added that non-compensation costs of the activity would also go up by more than $500 million sequentially.
This setup was a bit challenging. Goldman has just posted a record quarter, but management is essentially telling investors that it might not be as strong in the next one.
Despite that, equity trading has picked up nicely and investment-banking backlog continues to be at the highest level in five years. That provides Goldman with valuable backing in a slowdown in trading revenue.
Is Goldman Stock Actually Cheap?
A 20% drop does not automatically make a stock cheap. Goldman trades at roughly 14 times trailing earnings and about 13.5 times forward earnings, close to the investment-banking industry’s roughly 13.4 times forward multiple. However, it has an elevated P/B ratio of 2.5, showing it’s more profitable than other banks, all while paying a substantial dividend yield.
The valuation is therefore not so cheap. Investors aren’t only not paying top dollar; they’re also not paying a distressed-bank price.
That’s relevant because the next step in the stock’s price action will likely be determined by outperformance in terms of duration, not a “gut check” based on multiple expansion.
Why the Bear Market Matters
Goldman’s 20% decline from its record high is more than a psychological milestone. It shows the market has started pricing in the possibility that earnings may normalize after an unusually strong period.
The second quarter was powered by several exceptional trends. Equity trading revenue jumped 72% to $7.42 billion, FICC revenue rose 32% to $4.59 billion, and investment-banking fees surged 55% to $3.4 billion. Goldman also advised on $1.2 trillion of M&A volume in the first half of 2026.
The problem is that these numbers create a very high bar. If market volatility fades, trading revenue could soften. If dealmaking slows, investment-banking fees could follow. Meanwhile, higher expenses could put additional pressure on margins.
There is also a leadership question. Reuters reported that Goldman’s board has discussed John Waldron, the firm’s president and COO, as a potential successor to Solomon, possibly in 2027 or 2028. Goldman has stressed that no definitive timeline has been set.
Wall Street is Still Looking for Upside
Analysts have turned more cautious, but they have not abandoned Goldman Sachs.
Recently, we have seen multiple shuffles from analysts. For instance, Evercore ISI cut its target to $1,000 from $1,210 while keeping a Buy-equivalent rating, while Bank of America maintained a $1,300 target.
Also, Wells Fargo lowered its target to $1,175 from $1,325, and RBC kept a Hold rating with a $1,220 target. HSBC raised its target to $1,007 from $995, while Citi maintained a Neutral rating with a $1,050 target.
Despite the lower targets, Consensus data is still constructive. Barchart shows most analysts carrying “Moderate Buy” ratings, while other aggregators show an average target of $1,138, suggesting a healthy 26% upside premium.
That all leaves Goldman in an unusual position. The stock is in a bear market, but the underlying franchise is still producing record earnings and strong returns. The next major test arrives with third-quarter results on Oct. 13.
The question for investors now isn’t whether Goldman is a good bank. It is whether the profits are robust enough to support the price of a stock as the market is wondering whether a recent run is going to continue.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com