What it means for Goldman Sachs investors
The rebound in Wall Street dealmaking is undeniable. And, for Goldman Sachs , that’s undeniably bullish. Investors got two new reasons to be optimistic about the Club stock this week: Goldman was tapped as a financial advisor in the massive deal to take video game publisher Electronic Arts private, and smaller investment bank Jefferies posted its best third-quarter revenue ever , lifted by strength in the dealmaking environment. Both of these developments bode well for revenue in Goldman’s crucial investment banking division — a key reason we initiated a position back in December 2024 . Goldman’s investment banking business, which brings in fees from services like underwriting initial public offerings (IPO) and advising on mergers and acquisitions (M & A), has been rebounding over the past several quarters. Higher interest rates and macroeconomic uncertainty coming out of the worst of the Covid pandemic nearly froze IPO and M & A activity in 2022. A stringent regulatory environment under former President Joe Biden was also a headwind. After Donald Trump won the 2024 presidential election, expectations were high that his second term would usher in a more relaxed approach to business regulations. The stock market soared post-election, but then tanked on tariffs. Now, on the other side of the worst of the trade policy uncertainty, the bet on a dealmaking comeback is starting to pay off. GS YTD mountain Goldman Sachs (GS) year-to-date performance Shares of Goldman Sachs have reflected that investment banking bounce — closing at a record high $806 each last Tuesday. The stock, which has since come off the boil a bit, is still up roughly 38% year to date. That’s even after Tuesday’s roughly 1.5% drop on lower-than-expected consumer confidence data. The stock market overall was also lower ahead of a possible government shutdown. Tuesday’s trading does not, however, change our bullish thesis on Goldman, which is further supported by the two aforementioned announcements, starting with the EA leveraged buyout. Biggest LBO ever Goldman was revealed Monday as a financial advisor for Electronic Arts in its agreement to be acquired by private equity firm Silver Lake, Jared Kushner’s Affinity Partners, and the Saudi Public Investment Fund. The all-cash deal, which is expected to close in the first quarter of fiscal year 2027, is worth around $55 billion. The consortium will be making a combined equity investment of roughly $35 billion and $20 billion in debt financing from JPMorgan. If completed, this will go down as the largest leveraged buyout in U.S. history. A leveraged buyout, often referred to as an LBO, is a method of acquiring a company in which the deal is financed by a mix of equity and debt. Goldman will receive huge fees for advising EA in the take-private deal — a boon to its investment banking revenue. The transaction keeps Goldman at the top of the list among M & A advisors, a title it has held for eight years, according to Bloomberg. As Jim Cramer said in the September Monthly meeting , “Goldman’s got everything going for it: IPOs, M & A, wealth management, sales and trading. And, it’s the best at them. The best.” Blowout quarter Jefferies’ stellar quarter after Monday’s close showcased company-record advisory fees on a better dealmaking backdrop. Advisory revenue jumped 10.7% in the quarter to $655.6 million. In sum, investment banking net revenue surged 20.3% to $1.14 billion from a year earlier. Shares fell more than 3.5% on Tuesday despite the better-than-expected release. The stock was caught up in Tuesday’s bank stock selloff, which also hit Club name Wells Fargo . The quarterly results from Jefferies give investors a positive read-through to Goldman’s earnings report on Oct. 14. Wells Fargo will report on the same day. Jim, however, described the Jefferies quarter as amazing during ” Squawk on the Street ” on Tuesday morning. Now, let’s hope the Club’s holdings can also deliver. We will also be looking to see how Goldman’s second-largest division, asset and wealth management, has performed while the bank tries to dominate a less crowded corner of Wall Street. (Jim Cramer’s Charitable Trust is long GS, WFC. See here for a full list of the stocks.) As a subscriber 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 trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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