Analyst Note
| Michael Wong, CFA, CPA |Goldman Sachs’ net revenue remained fairly strong in the third quarter, and it recently announced two acquisitions that will incrementally improve its mix of relatively stable earnings. The company reported net income to common shareholders of $5.3 billion, or $14.93 per diluted share, on $13.6 billion of net revenue. Net revenue sequentially decreased 12% with about all of the decrease attributable to principal transaction revenue that was $1.6 billion in the quarter compared with $4.3 billion in the second quarter. Equity investments revenue that is part of principal transactions was a record $3.7 billion in the second quarter, but some public investments of Goldman Sachs suffered in the recent quarter and public equity investment revenue came in at a loss of $820 million compared with a gain of $780 million in the second quarter. Outside of principal transaction revenue, Goldman Sachs’ other revenue lines were sequentially up or flat compared with the second quarter. The company’s quarterly investment banking revenue had its second best quarter ever, including record revenue in financial advisory, and had record revenue in its consumer and wealth management segment. We don’t anticipate making a material change to our $356 fair value estimate for narrow-moat Goldman Sachs.