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Morgan Stanley Gains 9.5% YTD: Will Rate Cuts Boost MS Stock?
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One of the most well-known global investment banks, Morgan Stanley (MS - Free Report) , is generating a lot of interest among investors. The company’s shares have gained 9.5% so far this year.
The stock is trading well below its peers – Goldman Sachs (GS - Free Report) and JPMorgan (JPM - Free Report) . Also, it compares unfavorably with the industry and the Zacks S&P 500 composite.
YTD Price Performance
Image Source: Zacks Investment Research
The recent weakness in Morgan Stanley shares can be attributed to the subdued performance of the wealth management business in the second quarter of 2024. The Wealth Management segment, which generates almost 50% of the company’s net revenues, failed to deliver as expected. The segment’s revenues declined 1% sequentially, while net income was stable. Also, net new assets in the Wealth Management segment decreased 62% from the prior quarter.
Morgan Stanley, under its new CEO Ted Pick, has been trying to focus less on capital markets-driven revenues. So, the weak performance of the wealth management operation is concerning. Nonetheless, the recent statement by the Federal Reserve chairman Jerome Powell on interest rate cuts is likely to turn around Morgan Stanley’s investment banking business.
MS witnessed a solid resurgence in advisory and underwriting businesses in the second quarter on the back of robust deal-making and underwriting activities. These activities have been weak since 2022, given the higher interest rates and uncertain macroeconomic backdrop.
As the path for the Fed’s rate cuts is clear and the U.S. economy is on solid footing, an increase in deal value and volume will likely continue in the quarters ahead.
Almost two weeks ago, the MS stock crossed the 50-day simple moving average, indicating robust upward momentum and price stability. This underscores positive market sentiments and confidence in the company's financial health and prospects.
50-Day Moving Average
Image Source: Zacks Investment Research
With Morgan Stanley’s stock price breaking out, investors face a crucial decision: should they buy, hold or sell the shares now?
Bullish Analyst Sentiments for MS
Analysts seem to be bullish about Morgan Stanley’s prospects. Over the past month, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward.
Estimate Revision Trend
Image Source: Zacks Investment Research
This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects. Further, over the long term, the company’s earnings are expected to grow 13.9%.
Morgan Stanley’s Compelling Valuation
MS stock is trading at a discount, with a 12-month trailing price-to-tangible book (P/TB) of 2.37X compared with the industry’s 5.02X and higher than the median of 2.06X.
Price-To-Tangible Book TTM
Image Source: Zacks Investment Research
Meanwhile, Goldman and JPMorgan are trading at 1.6X and 2.53X of 12-month trailing P/TB.
How to Play the Morgan Stanley Stock?
While Morgan Stanley stock is trying to break out, caution is warranted for prospective investors. The company’s global presence, rebound in the investment banking business and efforts to focus on less volatile revenue streams provide a solid base for organic growth.
MS also continues to reward shareholders handsomely. As it cleared the 2024 stress test, the company announced an increase in its quarterly dividend by 8.8% to 92.5 cents per share. In the last five years, it increased dividends four times, with an annualized growth rate of 28.1%. It also reauthorized a new multi-year share repurchase program of up to $20 billion, effective the third quarter of 2024.
However, challenges like high rates, the expected economic downturn and the tough macroeconomic backdrop cannot be ignored. Investors need to keep a watch on the company’s wealth management business.
Hence, current stakeholders should maintain their position in this Zacks Rank #3 (Hold) stock. Potential new investors might consider waiting for more clarity on how MS navigates the broader economic landscape before making new investment decisions. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Morgan Stanley Gains 9.5% YTD: Will Rate Cuts Boost MS Stock?
One of the most well-known global investment banks, Morgan Stanley (MS - Free Report) , is generating a lot of interest among investors. The company’s shares have gained 9.5% so far this year.
The stock is trading well below its peers – Goldman Sachs (GS - Free Report) and JPMorgan (JPM - Free Report) . Also, it compares unfavorably with the industry and the Zacks S&P 500 composite.
YTD Price Performance
Image Source: Zacks Investment Research
The recent weakness in Morgan Stanley shares can be attributed to the subdued performance of the wealth management business in the second quarter of 2024. The Wealth Management segment, which generates almost 50% of the company’s net revenues, failed to deliver as expected. The segment’s revenues declined 1% sequentially, while net income was stable. Also, net new assets in the Wealth Management segment decreased 62% from the prior quarter.
Morgan Stanley, under its new CEO Ted Pick, has been trying to focus less on capital markets-driven revenues. So, the weak performance of the wealth management operation is concerning. Nonetheless, the recent statement by the Federal Reserve chairman Jerome Powell on interest rate cuts is likely to turn around Morgan Stanley’s investment banking business.
MS witnessed a solid resurgence in advisory and underwriting businesses in the second quarter on the back of robust deal-making and underwriting activities. These activities have been weak since 2022, given the higher interest rates and uncertain macroeconomic backdrop.
As the path for the Fed’s rate cuts is clear and the U.S. economy is on solid footing, an increase in deal value and volume will likely continue in the quarters ahead.
Almost two weeks ago, the MS stock crossed the 50-day simple moving average, indicating robust upward momentum and price stability. This underscores positive market sentiments and confidence in the company's financial health and prospects.
50-Day Moving Average
Image Source: Zacks Investment Research
With Morgan Stanley’s stock price breaking out, investors face a crucial decision: should they buy, hold or sell the shares now?
Bullish Analyst Sentiments for MS
Analysts seem to be bullish about Morgan Stanley’s prospects. Over the past month, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward.
Estimate Revision Trend
Image Source: Zacks Investment Research
This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects. Further, over the long term, the company’s earnings are expected to grow 13.9%.
Morgan Stanley’s Compelling Valuation
MS stock is trading at a discount, with a 12-month trailing price-to-tangible book (P/TB) of 2.37X compared with the industry’s 5.02X and higher than the median of 2.06X.
Price-To-Tangible Book TTM
Image Source: Zacks Investment Research
Meanwhile, Goldman and JPMorgan are trading at 1.6X and 2.53X of 12-month trailing P/TB.
How to Play the Morgan Stanley Stock?
While Morgan Stanley stock is trying to break out, caution is warranted for prospective investors. The company’s global presence, rebound in the investment banking business and efforts to focus on less volatile revenue streams provide a solid base for organic growth.
MS also continues to reward shareholders handsomely. As it cleared the 2024 stress test, the company announced an increase in its quarterly dividend by 8.8% to 92.5 cents per share. In the last five years, it increased dividends four times, with an annualized growth rate of 28.1%. It also reauthorized a new multi-year share repurchase program of up to $20 billion, effective the third quarter of 2024.
However, challenges like high rates, the expected economic downturn and the tough macroeconomic backdrop cannot be ignored. Investors need to keep a watch on the company’s wealth management business.
Hence, current stakeholders should maintain their position in this Zacks Rank #3 (Hold) stock. Potential new investors might consider waiting for more clarity on how MS navigates the broader economic landscape before making new investment decisions. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.