Goldman Sacks has 50% downside

Discussion in 'Stocks' started by Warrior4g, Mar 17, 2008.

  1. Oppenheimer came out with a note today saying brokerage/banking stocks could drop another 50%.goldman down over 15 bucks so far.
  2. S2007S


    surprised to see it above $140
  3. Did they speak specifically of Goldman Sachs of did they speak of the sector as a whole?

  4. All stocks have a 100 % downside at all times.
  5. of course all stocks can go to zero but saying 50% downside is realistic. oppenheimer were spot on about brokerage stocks.
  6. .00001
  7. Not sure why you chose to concentrate (thread title) on Goldman Sachs when Whitney's note clearly mentions Citigroup, Merrill Lynch and UBS at to having a lot of exposure on their books. Care to elaborate?
  8. I like Goldman Sachs...:) :D :p
  9. Why?
  10. Banking analysts react to Bear and JPM

    There but for the grace of god….No time for sighs of relief, though, as the banking analysts at Bear’s competitors got typing.

    From Morgan Stanley:

    Where we Differ: Acquisition does not come without risk. A $700 million decline in asset value, or 3.2% of remaining risky assets (excluding $20B non-recourse assets) eliminates the accretion in 2008. It takes another 25% in target expense reduction to get back to the original 4.1% accretion. So, there is meaningful execution risk.

    From Lehman:

    Still, what the valuation JPM paid says for the valuation of financial assets in general could be disconcerting to bank stock investors, although we note BSC was under considerable liquidity strain over the past week. While the concurrent Fed actions of a 25bp cut in the discount rate (lowering the spread to Fed Funds to 25bps) and the expansion of the program are pluses, they may not be enough to stem current investor concerns with respect to bank stocks.

    Keefe, Bruyette & Woods on European banks:

    Bear (1): Management confidence eroded. While BSC CEO Alan Schwartz and SEC Chairman Christopher Cox both reassured the market on Monday and Tuesday, a significant deterioration on Thursday left BSC needing emergency funding by Friday. As such, future reassurances from managements and regulators are likely to provide less comfort to investors. Bear (2): Systemic concerns remain. Two liquidity-enhancing announcements within the last seven days appeared to break the downward spiral of credit prices. However, confidence was not sufficient to save BSC, suggesting concerns about margin calls and asset sales linger with commensurate fears for the institutions financing these levered investors (CDS spreads on IBs closed at recent highs on Friday). Bear (3): Market volatility. BSC was briefly indicated up 11% at Friday’s open before crashing to close the day down 47%. With such volatility in the market we suspect many market participants will be wary of bottom fishing for value straight away, particularly given the lack of external visibility on many aspects of financial health at present. Bear (4): Further dollar slide. The dollar fell to recent lows against the Euro and Swiss Franc on Friday. All 3 Euro IBs have sizeable US operations and dollar-earnings and as such are vulnerable to further deterioration. Bear (5): Risk of punitive regulation. Use of emergency Fed funding increases the chances of more burdensome regulation for the brokerage industry in the future in our view.

    Bull (1): Liquidity measures meaningful. Fed measures since 7 March create a cumulative expectation of an additional $340bn of potential liquidity in RMBS, some 5% of outstandings. Prices appear to have somewhat stabilised as a result. Bull (2): BSC 1Q08 EPS / book value. BSC indicate that 1Q08 earnings fell within the range of analyst forecasts (implicitly a 2-9% ROE) and that current book value was “in the eighties” (i.e., little changed from $84 at end-Nov). This helps reassure us that at least some IBs should have managed to negotiate the current landscape profitably. Bull (3): Euro IBs systemically important. As either the #1 or #2 largest banks in their home countries, CS, UBS and DBK are more likely to be regarded as belonging to the ‘too big to fail’ club in our view and therefore less vulnerable to the self-fulfilling prophecy of liquidity fears that afflicted BSC. Bull (4): Market share up for grabs. Taking a longer term view, those Euro IBs that emerge from the current turmoil with their balance sheets and franchises intact (at present DBK and CS) are likely to take meaningful market share from the players more focussed on damage limitation.
    #10     Mar 17, 2008