We upgraded the stock and raised our price target

Goldman Sachs' better-than-expected quarterly results ahead of Tuesday's open and comments on the post-earnings conference call give us confidence the stock is heading into 2026. Revenue rose 19.6% year over year to $15.18 billion in the third quarter ended Sept. 30, topping the $14.1 billion consensus estimate compiled by data provider LSEG. Earnings per share (EPS) rose 45.8% year over year to $12.25, according to LSEG, well above the $11 forecast. GS YTD Mountain Goldman Sachs YTD Despite a fairly clean report overall, shares of the world's leading investment bank got off to a rough start, falling more than 5.5% early in the session. Perhaps this was due to profit-taking in the overall market, which was dragged down by the resurgence of US-China trade concerns. But shortly after Goldman's call began at 9:30 a.m., Club shares and the S&P 500 also bottomed and later turned green. Goldman shares pared losses. Investors should remember that no one, including President Donald Trump, wants to see an all-out trade war. Despite all the tough talk, some justified, some strictly seen as a negotiating tactic, we need to focus on Goldman's strong and empowering fundamentals. With initial public offerings (IPOs) and mergers and acquisitions (M&A) likely to improve further next year, and deregulation also a tailwind, we see plenty of room for Goldman shares to move higher. Therefore, we upgrade the stock to our 1 repurchase-equivalent rating and raise our price target to $850 per share from $750. The stock is up nearly 35% year to date as it drifts down from record highs in late September; It outperformed the S&P 500's 13% rise. In Summary This was a very strong quarter for Goldman Sachs, and any persistent weakness in its shares should be viewed as a buying opportunity. While expenses were slightly higher than expected, that's not a concern given the strong third quarter revenues and earnings. More importantly, all of the top metrics investors use to rate financial firms were ahead of expectations. Goldman's productivity ratio fell 3.2 points from the previous year's period, falling below expectations; Remember, lower is better here since the ratio is calculated by dividing total non-interest expenses by net income. Tangible common stock return and tangible book value per share both surprised to the upside. These three measures play a key role in determining the appropriate price-earnings multiple to be reflected in financial firm earnings. Goldman's third quarter will support a higher valuation multiple if we see trade talks with China yield results and the economy stays afloat as the Federal Reserve tries to keep inflation in check and support the labor market; This, along with earnings growth fueled by increased IPOs and mergers and acquisitions, will allow shares to soar higher in 2026. Why do we have Goldman Sachs? Goldman Sachs' bet is that there will be a rebound in deal-making as the regulatory environment improves under President Donald Trump. Investment banking is a large part of Goldman. Start date: December 19, 2024 Last purchase: March 19, 2025 Competitors: Morgan Stanley, JPMorgan, Bank of America, and Citigroup Another positive indicator of the bank's ability to both invest in further growth while generating cash returns to shareholders is its core capital 1 (CET1) ratio of 14.4%, which is well above the 10.9% minimum ratio for the firm. Speaking of growth investments, we want to quickly highlight that the firm announced Monday that it has acquired Industry Ventures for $665 million in cash and equity. Another $300 million will be paid based on Industry Ventures' future performance through 2030. The deal is expected to close in the first quarter of 2026 and further diversify Goldman's existing $540 billion alternative investment platform. Leveraging alternative assets is a trend on Wall Street; fellow Club BlackRock is working to do the same. BlackRock also reported a strong quarter on Tuesday morning. In the third quarter, Goldman repurchased 2.8 million shares worth about $2 billion and paid $1.25 billion to shareholders through dividends. Companywide controlled assets hit a new record at $3.45 trillion; About $80 billion came from market valuation and another $79 billion came from long-term net inflows since the second quarter. This marks the 31st consecutive quarter of long-term, fee-based net inflows. Before diving into the quarterly results further, we thought this comment from CEO David Solomon on the call was particularly notable as it relates to the broader market environment. "Taking a step back, there's no doubt that there's a fair amount of investor enthusiasm right now, with US stock markets steadily hitting record highs over the last few months. Much of this has been driven by the massive amount of investment in AI infrastructure that has led to significant capital formation. But as students of history, after periods of broad-based excitement around new technologies, there's ultimately a divergence in where some startups diverge." We know it will happen. thrive and others flounder. While I feel good about the forward outlook on balance, the market operates in cycles and disciplined risk management is imperative. “We are especially vigilant in times like these to proactively manage risks while continuing to serve our customers with our best-in-class execution capabilities and insights,” Solomon said. Goldman Sachs is one of the best, if not the best, risk managers in the world is one, and we think all investors would do well to keep Solomon's words in mind. Yes, some of the AI winners will continue to win. Of course, we trust the names in the club portfolio. However, it is undeniable that some parts of the market are becoming increasingly frothy, and many of the speculative names on offer now may well not exist 10 years from now. The club does not own any of these shares. As a result, members rely on artificial intelligence should consider their own portfolio risks and risk management protocols in relation to exposure. Commentary Goldman's global banking and markets division saw revenue rise 18% year over year to $10.12 billion in the third quarter, well above expectations. Revenue from investment banking, the largest part of the segment, was "significantly higher" compared to the previous year, with consulting (up 60% year-on-year) and debt (up 60% year-on-year) Brokerage revenue increased 42% YoY (up 30%), as well as equity brokerage revenue (up 21% YoY). During the call, Solomon struck an optimistic tone about the investment banking landscape, saying: "M&A activity creates a real multiplier effect, whether it's bridge financing, derivative hedging, investment opportunity and asset management." He added: "The board of directors From our conversations in their rooms and after a period of increased uncertainty and volatility earlier in the year, it is clear that many of our clients are navigating and adapting to the current situation. While short-term policy considerations are still relevant, many CEOs have shifted their focus back to long-term, strategic decision-making. Particularly in a more supportive regulatory environment." Fixed income, foreign exchange and commodity income totaled $3.47bn, 17% above last year's level and above the $3.12bn expected. The strong result reflects very strong brokerage income (up 21% y-o-y) combined with strong financing results (up 9% y-o-y). Equity income was "significantly higher" than the same period last year. Financing income (33% y-o-y) increase) by 7% year-on-year, only partially offset by a decline in brokerage revenue (down 9% year-on-year). The asset and wealth management division's third-quarter revenue rose 17% from a year ago and 16% sequentially. Total management and other fees increased by 12% year-on-year, driven by a 6% increase in asset management fees and a 17% increase in asset management fees. The fee increase largely reflects an increase in controlled assets. private banking and lending fees increased by 40% year-on-year, while debt investment income increased by 9% compared to the same period last year. On the other hand, creative wages fell 9% year-on-year. Platform solutions revenue beat expectations in the third quarter, rising 71% year over year, but falling 2% sequentially. The 80% increase in consumer platforms revenue was coupled with a 22% increase in transaction banking and other revenue. Although growth rates are impressive It should be noted that the growth of the consumer platform has benefited from the transfer of the bank's General Motors credit card program to "held for sale" status. Although solid and ahead of expectations, growth rates in this line cannot be predicted as they reflect the breakthrough of one-time problems. (Jim Cramer's Charitable Trust is long GS, BLK. For a full list of stocks, click here see.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing the trading alert before executing the trade. INVESTMENT CLUB ABOVE YOUR INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, WITH ITS DISCLAIMERS. 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