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Morgan Stanley (MS) stock forecast: Can results keep up momentum?


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Morgan Stanley (MS) stock forecast: Can results keep up momentum? Morgan Stanely building and logo. Morgan Stanley is an American multinational financial services corporation.
Morgan Stanley (MS) stock forecast: Can results keep up momentum? Photo: Ken Wolter / Shutterstock.com

Morgan Stanley’s (MS) first-quarter results exceeded expectations, with earnings per share (EPS) beating analyst’s consensus estimates, and the bank reporting a 20% return on tangible equity. 

But these headlines belie a more complex picture. The bank saw investment banking income plummet, and net revenues were down almost 6% on the prior-year quarter.

Can the multinational banking giant maintain the momentum in a climate of market volatility and economic uncertainty? Here we take a look at what factors are shaping the Morgan Stanley stock forecast.

Latest results

Morgan Stanley (MS) reported first-quarter results on 14 April. These came amid a climate of what Quilter Cheviot’s Jack Bishop described as a “somewhat disappointing first quarter results from banks”, with JP Morgan (JPM), Citigroup (C), Wells Fargo (WFC) and Goldman Sachs (GS) all reporting double-digit declines in first-quarter earnings. 

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 $2.0, beat the analysts’ consensus of $1.69. 

In further positive news, Morgan Stanley reported 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 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. 

MS stock analysis: Looking at 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 the data provided by MarketBeat. Morgan Stanley offers a dividend yield of 3.14%, significantly lower than the benchmark level of 5.67% for competitor finance companies. 

Morgan Stanley shares have a price/earnings (P/E) ratio of 12.08 versus an industry average of 11.50. Its price/sales ratio is also high at 2.52, against an industry average of 2.09. Both metrics could signal that the stock may be overvalued. 

Despite this, as of 19 April, the analysts’ price target consensus for Morgan Stanley stock was $107.69, a 21.07% upside on the then share price. 

Morgan Stanley stock price history

Coming into 2020, Morgan Stanley shares were trading at around $50 but fell to around $30 in March as 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. 

Title: MS stock chart 2017-2022

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, the share price rallied, rising by almost 4% to $86.41 as earnings exceeded expectations. 

In terms of technical analysis, relative strength index (RSI) figures do not currently suggest high momentum for the stock with a neutral reading of 53.21, as of 19 April 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? 

The 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 Chairman and CEO 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.

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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 plummetted 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. 

“Given that there remains substantial uncertainty over the near to medium term with the Russia-Ukraine conflict, supply chains, inflation, rising interest rates, and potential for a recession, market volatility is likely to continue,” said Morningstar’s Michael Wong in an 18 April briefing. 

"Higher-than-average volatility should continue to help trading, while eventually lowering investment banking revenue.”

Macroeconomic malaise

Morgan Stanley CEO James Gorman refered repeatedly to market volatility and economic uncertainty 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.

“A recession would be the biggest danger, as any deflationary shock, no matter how unexpected given the current circumstances, would potentially have a devastating effect on the economy and therefore loan books, given how indebted the US economy is right now,” said Russ Mould, Investment Director at AJ Bell, speaking exclusively to Capital.com in October 2021. 

Morgan Stanley stock predictions: Analyst views

As of 19 April, analysts rated Morgan Stanley stock a consensus ‘buy’, with 10 ‘buy’ ratings, 10 ‘hold’ and zero ‘sell’, according to the data from MarketBeat. 

Morgan Stanley stock predictions for the next twelve months varied significantly from a low of $94 to a high of $125. The analysts’ price target consensus stood at $107.69, a 22.43% upside on the share price at the time of writing (20 April).

Two 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 their price target from $110 to $123, 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 $105 Morgan Stanley (MS) stock price target. Though less bullish than BMO’s target, this still represented a 23.88% upside on the report date share price.

Following results, Morningstar’s Michael Wong maintained a $95 fair value estimate for Morgan Stanley, and assessed 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 predictions for the years ahead. 

Wallet Investor rated Morgan Stanley stock ‘a good long-term investment’, as of 19 April 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 $105.16 by April 2023, $125.52 in April 2024 and $145.95 in April 2025. 

Looking towards 2030, Wallet Investor’s MS stock price forecast saw the stock price reaching $166.32 by April 2026 before hitting $186.71 by April 2027. 

Note that algorithm-based price predictions can be wrong. Algorithmic share price forecasts for Morgan Stanley shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

FAQs

What is Morgan Stanley?

Morgan Stanley, a financial holding company, provides various financial products and services to corporations, governments, financial institutions and individuals in the Americas, Europe, the Middle East, Africa and Asia.

What does Morgan Stanley do?

Morgan Stanley operates through three segments: Institutional Securities, Wealth Management and Investment Management.

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