Goldman Sachs Predicts Earnings Boost: Unveiling Top 3 Club Stocks Set to Rally

Goldman Sachs has recognized Wells Fargo as one of the best-positioned large bank stocks for the upcoming 3Q23 earnings. Key areas of focus for investors include weakening net interest margins (NIMs) due to rising deposit costs, credit concerns regarding commercial real estate and other delinquencies, and the implementation of Basel 3 Endgame norms. Despite these challenges, Wells Fargo trades at a relatively low multiple of 8.3 times forward earnings estimates, below the five-year average. The research analysts at Goldman Sachs believe that Wells Fargo’s management has adequately addressed risks and incorporated potentially higher-for-longer policy rates into their guidance. They also note the bank’s lower commercial real estate exposure compared to peers as a positive factor. Additionally, they predict that Wells Fargo has the capacity for share buybacks, exceeding that of its peers, even with higher capital requirements.

Humana, which currently trades at a multiple of 15.8 times forward earnings estimates, has caught Goldman analysts’ attention with a positive outlook for 2024. They believe that the stock offers favorable risk/reward, trading at a lower multiple compared to its five-year average. The analysts also anticipate increased conviction for next year, as utilization stabilizes and the potential impact of utilization/Medicare Advantage (MA) rate changes becomes clearer. According to their analysis, Humana is well-positioned to surpass market growth in Medicare Advantage membership in the coming year.

Nvidia, another stock on Goldman Sachs’ conviction list, holds a strong position in the accelerated computing industry. The analysts highlight Nvidia’s competitive advantage and its role as the industry standard for complex AI models. Trading at a multiple of 31.1 times forward earnings estimates, below its five-year average, the stock presents an interesting opportunity. The analysts emphasize that data center demand for Nvidia’s GPUs remains robust, and improvements in the supply chain are expected to lead to potential gross margin uplift. They also mention the inherent operating expense leverage in Nvidia’s GPU platform-based business model.

While we appreciate being included in Goldman Sachs’ list, we advise against trading solely based on earnings releases. Trading during this period can be challenging, as market reactions often deviate from expectations. Instead, we suggest viewing the Goldman research as a positive update on stocks with significant long-term upside potential. It can serve as a guide for listening to management commentary during upcoming earnings releases.

(Disclaimer: Jim Cramer’s Charitable Trust holds positions in WFC, HUM, and NVDA. For a complete list of stocks, please refer to the link above.)

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