Morgan Stanley (MS) stock forecast: Can results keep up momentum?
Morgan Stanley’s (MS) first-quarter results exceeded expectations, with earnings per share (EPS) beating analysts’ consensus estimates and the bank reporting a 20% return on tangible equity.
But these headlines belie a more complex picture. The bank also saw investment banking income plummet, while revenues were down almost 6% compared to the same quarter in the previous year.
With the multinational banking giant set to release its Q2 2022 results on 14 July 2022, can it maintain the momentum in a climate of market volatility and economic uncertainty? We take a look at what factors are shaping the Morgan Stanley stock forecast.
Latest results
Morgan Stanley (MS) reported its first-quarter results on 14 April 2022. These came amid a climate of what Quilter Cheviot’s Jack Bishop described as “somewhat disappointing first-quarter results from banks”, with JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC) and Goldman Sachs (GS) all reporting double-digit declines in first-quarter earnings.
The MS earnings report revealed net revenue of $14.8bn – down almost 6% on Q1 2021 levels, but still representing the bank’s second-highest quarterly net revenues.
Net income was also down from $4.1bn in Q1 2021 to $3.7bn in Q1 2022 (over a 20% decrease), but this still exceeded expectations. Morgan Stanley’s quarterly earnings per diluted share of $2.00 beat the analysts’ consensus of $1.69.
In further positive news, Morgan Stanley reported a return on tangible equity – a measure of how well the bank is using capital to generate profit – of 19.8%. It issued a quarterly dividend of $0.70 – double the Q1 2021 payout.
Morgan Stanley operates across three key business areas: Institutional Securities, Wealth Management and Investment Management. Institutional Securities saw net revenues drop by over 10% as volatile market conditions impacted dealmaking activity.
Wealth Management revenues proved more resilient, with the business adding $142bn in new assets over the quarter and seeing net revenues hold steady. Investment Management reported net revenues of $1.34bn, up 2.2% on the prior-year quarter.
Morgan Stanley stock analysis: Fundamentals
Morgan Stanley generated earnings per share of $2.02 in Q1 2022, beating the analysts’ consensus estimate of $1.69 by $0.33. The bank will pay a quarterly cash dividend of $0.70 a share on 13 May, equating to an annual dividend of $2.80.
This annual dividend is almost twice as high as other finance companies, who average a payout of $1.43, according to data provided by MarketBeat. Morgan Stanley offers a dividend yield of 3.65%, significantly lower than the benchmark level of 5.98% for competitor finance companies.
Morgan Stanley shares have a price/earnings (P/E) ratio of 9.75 versus an industry average of 9.38. Its price/sales ratio, at 2.19, was lower than the industry average of 3.91.
Morgan Stanley: Stock price history
Coming into 2020, Morgan Stanley shares were trading at around $50 but fell to around $30 in March, once it became clear that the pandemic was going to have a huge impact on the global economy.
Between March 2020 and August 2021, the share price mounted a strong recovery. A look at the MS stock chart on the graph below reveals a bull run that saw the share price recover from $30 to hit a 20-year high of $105 on 23 August 2021.
Between August 2021 and February 2022, the share price saw significant volatility, dipping below $100 several times, before recovering to $104.57 by 7 February 2022.
But February saw the start of a bear run, with soaring inflation figures and Russia’s invasion of Ukraine rattling markets. The share price fell by over 20%, hitting $83.45 on 8 March. Following the Q1 2022 results announcement on 14 April 2022, the share price rallied, rising by almost 9% to $90.41 as earnings exceeded expectations.
The MS stock price has since been on the decline, losing close to 15% from the 14 April high. Morgan Stanley stock was trading around the $77 mark on 12 July 2022.
In terms of technical analysis, Relative Strength Index (RSI) figures do not currently suggest high momentum for the stock, with a neutral reading of 53.76 as of 12 July 2022. A move in the RSI through 70 is interpreted as a signal that an uptrending asset might be about to go into reverse. The current level neither suggests the price will fall nor that the stock is about to see an upwards breakout.
Is Morgan Stanley a good stock to buy? Any decision to buy Morgan Stanley stock must be based on your own analysis and evaluation. You should consider the company’s stock price and fundamentals. Below are the key strengths and weaknesses of the investment bank.
Navigating volatility
Despite a challenging climate, Morgan Stanley’s Institutional Securities business reported strong results from its equity and fixed income divisions. Thanks to strong client engagement in the face of volatile markets, equity revenues rose to $3.17bn, an increase of almost 11% on the prior-year quarter.
Wealth Management also saw its revenues remain resilient, thanks to higher asset management fees and growth in bank lending. The business also added new assets of $142bn, up from $104.9bn in the prior-year quarter.
Strategic restructuring
According to a statement from CEO and board chair James Gorman, the bank’s strong results in the face of market volatility and economic uncertainty are thanks to the resilience of its diversified business.
“The quarter’s results affirm our sustainable business model is well positioned to drive growth over the long term,” he said in the 14 April results statement.
The US investment bank has recently undergone significant restructuring, placing more focus on its Investment and Wealth Management businesses through strategic acquisitions. Morgan Stanley recently acquired investment management company Eaton Vance and added E*TRADE to its wealth management business.
Through these acquisitions, the company hopes to reduce dependency on Institutional Securities revenues and the company’s dependence on capital markets. But will this diversification be enough to help it weather 2022’s economic storms?
Dealmaking down
Despite recent restructuring, Morgan Stanley’s reliance on its Institutional Securities (IS) business still leaves it vulnerable to market developments and client volumes.
IS revenues make up over 50% of total net revenues, and Q1 2022 saw a significant year-on-year decrease. This drop was driven by Investment Banking revenues, which plummeted to $1.63bn from $2.61bn in the prior-year quarter, a drop of 37%.
The uncertain market environment led to a significant reduction in equity underwriting revenues as market volumes fell. This was partially offset by higher equity net revenues, but analysts are concerned that this could still spell long-term trouble for the bank.
Macroeconomic malaise
Morgan Stanley CEO James Gorman referred to market volatility and economic uncertainty repeatedly in the MS Q1 earnings report. There is no denying that the global economy is facing a difficult macroeconomic outlook.
In the face of high inflation, the US Federal Reserve (Fed) is expected to hike interest rates at its next meeting in May, with a succession of rate rises anticipated over the course of the year. High rates can work in a bank’s favour, allowing them to profit from the spread between the interest they earn themselves and the lower rate they pay to customers with savings accounts.
But there is also a risk that rising inflation, high interest rates and continued uncertainty will lead to wider macroeconomic malaise. A period of recession could see demand for loans and deal-making stall, and there is even a risk of defaults if falling incomes leave monthly payments unaffordable. Difficult macroeconomic conditions could affect the Morgan Stanely stock forecast as we look towards 2025.
Morgan Stanley stock predictions: Analyst views
As of 12 July, analysts rated Morgan Stanley stock a consensus ‘hold’, with 8 ‘buy’ ratings, 9 ‘hold’ and zero ‘sell’, according to data from MarketBeat.
Morgan Stanley stock predictions for the next 12 months varied significantly, from a low of $80 to a high of $125. The analysts’ price target consensus stood at $104.69, a 36.46% upside on the share price as of 12 July 2022.
Seven analysts have reported on Morgan Stanley since it released Q1 results on 14 April 2022. In response to the better-than-expected results, BMO Capital Markets issued an ‘outperform’ rating and boosted its price target from $110 to $113, with the new target representing a 33.32% upside on the report date share price.
Richard Ramsden from Goldman Sachs issued a ‘neutral’ rating, and set a Morgan Stanley (MS) stock price target of $105 on 20 April 2022. Though less bullish than BMO’s target, this still represented a 18.10% upside on the report date share price.
Credit Suisse lowered its price target from $100 to $95 on 4 July 2022, maintaining a rating of ‘outperform’. The target reflects a 23.78% upside on the report date share price. Wells Fargo also lowered its target from $91 to $83 several days earlier, on 1 July 2022. The bank maintains an ‘equal weight’ rating on the stock, and its target represents a 9.12% upside on the report date share price.
Following the Q1 results in April, Morningstar’s Michael Wong maintained a $95 fair value estimate for Morgan Stanley, and assessed the bank’s shares as ‘modestly undervalued’ in an 18 April briefing note. Wong stated that though MS’s Q1 results were comparable to recent quarters, he believes that “results may look a bit more volatile like peers over the next several quarters”.
Note that analyst predictions are often wrong. Forecasts shouldn’t be used as a substitute for your own research when deciding whether MS stock is a buy, sell or hold. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
Morgan Stanley stock forecast 2022-2025
Though longer-term Wall Street analyst coverage is limited, algorithm-based forecasting sites provide some predictions for the years ahead.
WalletInvestor rated Morgan Stanley stock ‘a good long-term investment’ as of 12 July 2022. In its Morgan Stanley share price forecast, the site uses past price performance to inform future price projections, and it saw the share price reaching $98.74 by July 2023 and $118.40 in July 2024.
The website’s Morgan Stanley stock forecast for 2025 saw the stock trading at $138.00 in July that year. Looking towards 2030, WalletInvestor’s MS stock price forecast saw the stock price reaching $157.58 by July 2026 before hitting $173.41 by April 2027.
According to Simply Wall Street, the MS stock is 46% undervalued as of 12 July 2022, according to the website’s fair value estimate of $140.33.
Note that algorithm-based price predictions can be wrong and should not be used as a substitute for your own research. Always conduct your own due diligence before investing, and never invest or trade any money you cannot afford to lose.
FAQs
Is Morgan Stanley a good stock to buy?
As of 12 July 2022, algorithm-based forecasting website WalletInvestor rated Morgan Stanley stock ‘a good long-term investment’ and predicted that the company’s share price could reach $98.74 by July 2023 and $118.40 in July 2024. But remember that predictions can be wrong, and that forecasts shouldn’t be used as a substitute for your own research.
Whether MS stock is a good investment for you depends on your personal circumstances and risk appetite. You should do your own due diligence and evaluate the level of risk you are prepared to accept before investing. Never invest money you cannot afford to lose.
Will Morgan Stanley stock go up or down?
Wall Street analysts’ projections on MarketBeat indicated a consensus price target of $104.69 – a 36.46% upside on the share price – as of 12 July 2022. Algorithm-based forecasting website WalletInvestor rated Morgan Stanley stock ‘a good long-term investment', and predicted that the company’s share price could reach $98.74 by July 2023 and $118.40 in July 2024.
It should be noted that predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading, and never trade money you cannot afford to lose.
Should I invest in Morgan Stanley stock?
Your decision to invest in Morgan Stanley (MS) stock will depend on your risk tolerance, portfolio size and goals, and experience in the stock market. You should do your own research to form an opinion on whether the stock is suitable for you.
Remember that past performance does not guarantee future returns. Never invest or trade money you cannot afford to lose.
Markets in this article
