CALLGS22 days ago8Kviews

Goldman Sachs: the discount is now a governance question, not an earnings one

The gap to global peers widened again this quarter while the earnings gap did not. What remains is a risk premium on process rather than on profits.

Theo Marchetti@theo_marchetti

Evidence · 3 cards

The case

Goldman Sachs: the discount is now a governance question, not an earnings one

The gap to global peers widened again this quarter while the earnings gap did not. What remains is a risk premium on process rather than on profits.

The edge

The Street says

Consensus models the cycle turning in the second half
Sell-side target clusters within 8% of spotAuto

I say

The turn already happened in order intake two quarters ago
My number is 14% above the street on the out yearCreator est.

The steelman

The counterpoint

“You are underwriting a margin structure that has only held for three quarters.”

The counter-counterpoint

Three quarters through a pricing reset that took two competitors out of the market. The structure is the consequence of the exits, not of the cycle.

The analyst chose to be challenged and answered on the record.

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Discussion · 6

Ines FerreiraAUG 21

I came in sceptical. The installed base argument is stronger than the cycle argument here. Where does this break if rates back up another 50bp?

Theo MarchettiAuthorAUG 21

Fair challenge. The read-across is real for the closest comparable and much weaker beyond it, because the contract structures differ.

Dana KatzAUG 21

Not convinced, but well argued. Second source in a constrained market is genuinely underrated. Where does this break if rates back up another 50bp?

Theo MarchettiAuthorAUG 21

Good question. Without the catalyst date I would not underwrite it. The date is doing a lot of the work and I would rather say that plainly.

Ines FerreiraAUG 21

Respectfully, I think this overstates it. Second source in a constrained market is genuinely underrated. What is the base rate on this kind of setup working?

Pauline VidalAUG 21

I have been waiting for someone to make this argument. The elasticity decay across the price actions is the tell. Does the same logic apply to the closest comparable?