1 share to buy, 1 to throw away when markets open: Goldman Sachs, Robinhood

Wall Street shares ended lower to close the first trading week of 2022 on Friday. The index suffered its biggest weekly drop in almost a year as surging Treasury yields triggered a sell off of many top-rated tech stocks.

S&P 500, NASDAQ and US 10-year chart

The index jumped 26 basis points for the week, closing at 1.765%, after the midweek release of. The benchmark hit a session peak of 1.801% on Friday, the highest level since January 2020.

Monthly 10-Year Yield Graph
Monthly 10-Year Yield Graph

The week ahead should be even busy, given the start of the fourth quarter earnings season on Wall Street, which sees names like JPMorgan Chase (NYSE :), Citigroup (NYSE :), Wells Fargo (NYSE 🙂 and Delta Air Lines (NYSE 🙂 report all of their latest financial results.

Important economic data is also on the agenda, including the latest report and the latest figures.

Whichever direction the market takes, below we highlight one action that may be called for in the coming days and one that may experience further losses.

Remember though, our timeline is correct for the coming week.

Stock to buy: Goldman Sachs

Given the continued rise in Treasury market rates resulting from rising bets that the Fed’s interest rates will rise faster than expected this year, Goldman Sachs Group (NYSE 🙂 shares appear to be a solid investment. for the coming week.

Higher rates and yields tend to increase the return on interest that banks earn on their loan products, or net interest margin, which is the difference between the interest income generated by banks. banks and the amount of interest paid to their depositors. This should bode well for Goldman, which has prospered in recent months on signs of robust investment banking activity, a booming IPO market and a recovering economy.

GS daily chart

GS stock is up 3.9% year-to-date and 37.1% in the past 12 months. It ended Friday’s session at $ 397.51, not far from a record high of $ 426.16 reached on November 2. At current levels, the New York-based financial services company has a market capitalization of approximately $ 132.6 billion.

Goldman, which for last quarter earnings and revenue, is expected to release its latest financial results before the U.S. market opens on Tuesday, Jan.18.

Consensus estimates call for the investment banking giant, which has beaten Wall Street estimates for six straight quarters, to post earnings per share (EPS) of $ 11.75 for its fourth quarter, down 2 .7% over prior year’s EPS of $ 12.08.

Revenue, however, is expected to rise 2.2% year-on-year to $ 12.0 billion, benefiting from a bullish performance from its investment banking unit and record asset management fees.

Beyond the highs and lows, investors will focus on Wall Street powerhouse’s continued efforts to return more money to shareholders in the form of higher dividend payouts and share buybacks.

Throwaway Stock: Robinhood Markets

Robinhood Markets (NASDAQ 🙂 shares could fall to new lows in the coming days as investors continue to worry about the negative impact of several factors plaguing the popular trading platform.

With rates rising rapidly due to the Fed’s readiness to tighten monetary policy more aggressively than previously thought, unprofitable tech companies like Robinhood are set to take further losses.

In general, higher yields and expectations of a more hawkish Fed policy tend to weigh heavily on high growth tech stocks with high valuations, as this threatens to erode the value of their cash flows at long term.

HOOD Daily Chart

HOOD stock, which started trading on the New York Stock Exchange at $ 38 after the company’s much-publicized IPO in late July, closed Friday’s trading at $ 15.89, or over 80 % below its all-time high of $ 84.12 reached on August 4. At current levels, the Menlo Park, California-based stock trading platform has a market cap of $ 13.6 billion.

Robinhood will report its results after the U.S. market closes on Tuesday, January 25. Consensus projects a loss of $ 0.35 per share for the fourth quarter on revenue of $ 367.5 million.

The financial services company said it was disappointing at the end of October and warned that the decline in retail activity and seasonal headwinds are likely to persist until the end of the year.

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