Goldman Sachs Group (GS) is set to report fourth-quarter earnings on January 15, and one analyst thinks CEO David Solomon's biggest headache isn't regulatory scrutiny or competitive pressure. It's something more fundamental: the wild swings that come with running a capital markets powerhouse.

Bank of America Securities analyst Ebrahim H. Poonawala bumped up his price target to $1,050 from $900 while keeping a Buy rating. But he's quick to point out the elephant in the room. With capital markets generating about 70% of Goldman's total revenue, investors are understandably nervous about the volatility baked into that business model.

The numbers tell the story. Goldman saw earnings per share plummet 56% between 2021 and 2023. That's the kind of swing that keeps investors up at night. There's a silver lining, though: financing revenue, which tends to be stickier and more predictable, has actually grown faster than trading revenue since 2021.

The Path Forward

Poonawala notes that Goldman's track record with transformational mergers and acquisitions has been hit-or-miss. So the path to more stable earnings will likely involve expanding revenue beyond capital markets, making smart bolt-on acquisitions, tightening operational efficiency, and keeping a strong capital cushion for when markets inevitably get choppy.

Looking ahead, the analyst expects a 20% year-over-year rebound in investment banking revenue for 2026, along with mid-single-digit growth in trading and financing. By 2027, Goldman should be hitting its stride with return on tangible common equity approaching 19%, an efficiency ratio around 60%, and a CET1 ratio of roughly 13.4%.

Poonawala raised his EPS estimates to $48.22 for 2025 (from $47.88), $57.30 for 2026 (from $56.50), and $67.30 for 2027 (from $65.00).

Goldman Sachs shares were down 2.10% at $935.41 at the time of publication on Wednesday, still hovering near the stock's 52-week high of $961.69.