Morgan Stanley’s stock (NYSE: MS) has misplaced roughly 7% YTD, as in comparison with the 9% rise within the S&P500 over the identical interval. Additional, the inventory worth decreased 5.2% yesterday vs a 0.74% improve within the broader index. Notably, the drop got here after the information of a regulatory probe towards the financial institution’s wealth administration unit was reported by the Wall Road Journal. Total, the inventory is presently buying and selling at $87 per share, which is 9% beneath its truthful worth of $95 – Trefis’ estimate for Morgan Stanley’s valuation.
Amid the present monetary backdrop, MS inventory has proven robust positive aspects of 20% from ranges of $70 in early January 2021 to round $85 now, vs. a rise of about 40% for the S&P 500 over this roughly 3-year interval. Nonetheless, the rise in MS inventory has been removed from constant. Returns for the inventory have been 43% in 2021, -13% in 2022, and 10% in 2023. Compared, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that MS underperformed the S&P in 2023. Actually, constantly beating the S&P 500 – in good occasions and unhealthy – has been troublesome over latest years for particular person shares; for heavyweights within the Financials sector together with JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In distinction, the Trefis High Quality (HQ) Portfolio, with a set of 30 shares, has outperformed the S&P 500 annually over the identical interval. Why is that? As a gaggle, HQ Portfolio shares offered higher returns with much less threat versus the benchmark index; much less of a roller-coaster journey as evident in HQ Portfolio efficiency metrics. Given the present unsure macroeconomic surroundings with excessive oil costs and elevated rates of interest, might MS face the same state of affairs because it did in 2023 and underperform the S&P over the following 12 months – or will it see a robust bounce?
The financial institution reported better-than-expected income figures within the fourth quarter of 2023. It posted complete revenues of $12.9 billion – up 1% y-o-y, primarily pushed by a 5% acquire in funding banking and a marginal improve within the gross sales & buying and selling segments. Additional, wealth administration and funding administration revenues have been at par with the earlier yr’s determine. On the price entrance, complete noninterest bills as a % of revenues witnessed an unfavorable improve within the quarter. Total, it led to a 35% drop within the adjusted web earnings to $1.4 billion.
The corporate’s high line grew 1% y-o-y to $54.14 billion in FY 2023. The wealth administration revenues improved by 8% y-o-y, however the impression was nearly offset by decrease funding banking and gross sales & buying and selling earnings. On the expense aspect, provisions for credit score losses elevated from $280 million to $532 million within the yr. Additional, complete noninterest bills rose by 6% y-o-y. Altogether, the adjusted web earnings was down 19% y-o-y to $8.53 billion.
Transferring ahead, we anticipate the identical pattern to proceed in Q1. Total, Morgan Stanley’s revenues are estimated to stay round $56.8 billion in FY2024. Moreover, MS’s adjusted web earnings margin is prone to see some enchancment within the yr, resulting in an adjusted web earnings of $9.82 billion and an annual GAAP EPS of $6.26. This coupled with a P/E a number of of simply above 15x will result in a valuation of $95.
| Returns | Apr 2024 MTD [1] |
2024 YTD [1] |
2017-24 Complete [2] |
| MS Return | -8% | -7% | 106% |
| S&P 500 Return | -1% | 9% | 132% |
| Trefis Bolstered Worth Portfolio | -2% | 5% | 644% |
[1] Returns as of 4/12/2024
[2] Cumulative complete returns because the finish of 2016
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
