Key Takeaways
- Morgan Stanley stock fell 11.9% in the past month (through Monday’s close) as bank stocks sold off, while the S&P 500 rose 0.6%.
- Its third-quarter beat on Oct. 14 didn’t stop the slide: equities trading jumped 41%, but fixed income fell 7% and CEO Ted Pick said activity had slowed since early September.
- Wealth Management posted record revenue of $9.1 billion, and the stock now trades at 3.4x tangible book, down from 4.6x in July.
- Analysts’ $214 consensus target is about 20% above Monday’s close, and the fourth-quarter report in mid-January is the next test.
Morgan Stanley (MS) stock fell 11.9% in the past month (through Monday’s close), while the S&P 500 rose 0.6%. And most of that drop had little to do with Morgan Stanley itself.
Two of the four worst days were about banks in general. On Sept. 22, the stock fell 2.9% as bank stocks broadly sold off. On Sept. 30, it fell another 2.4% as financials closed out September as the market’s worst sector, down more than 6%, with Treasury yields at multiyear highs.
Bank of America (BAC) fell 12.7% over the same month.
A beat that didn’t help
On Oct. 13, JPMorgan Chase (JPM) reported weaker fixed-income trading, and Morgan Stanley fell 1.8%.
Its own report the next morning beat expectations: EPS of $3.03 against the $2.91 analysts expected, on revenue up 12% to $20.3 billion. Equities trading jumped 41% to $5.8 billion.
The rest was softer. Fixed income fell 7%, and investment banking grew just 2%, with fewer IPOs weighing on equity underwriting. CEO Ted Pick said activity had slowed since early September on worries about conflict overseas, inflation and rising yields, and told CNBC: “I’m cautiously optimistic about the fourth quarter.”
The stock fell 2.8% that day.
Wealth Management is the floor
The market looked past Wealth Management, which posted record revenue of $9.1 billion, about 45% of the firm’s total, at a 30.4% pretax margin, and brought in $232 billion of net new assets. (Just over half of those assets came in with IPOs, so don’t count on that every quarter.)
That business has grown revenue in all but two of the last 12 quarters, up about 42% in three years, while trading swings with markets. So analysts still expect earnings to keep climbing…
…from $10.21 of normalized EPS in 2025 to $12.84 this year and $13.64 in 2027. Pick’s slowdown is the risk to those numbers, but the quarter itself gives no reason to cut them.
The Street trimmed, but didn’t bail
Nine firms cut their targets between Oct. 14 and Monday, RBC the most, to $195 from $243. KBW’s Christopher McGratty trimmed his to $230 from $250 but called the stock a “very attractive entry point.” JPMorgan’s analysts nudged theirs up, to $198.
That leaves the consensus target at $214…
…down from $237 in early September, but still about 20% above Monday’s $178.47 close. Even the lowest target, $185, is above it.
The price has come down a lot
Morgan Stanley traded at 3.4x tangible book on Friday, down from 4.6x in July.
That’s still above its five-year average of 2.7x. But the firm is earning more on that book: a 22.6% return on tangible common equity this quarter, its fifth straight above 20%.
And a TIKR model built around a down year for trading (revenue down 2% in 2027, margins cut to 28.8%, the multiple held at 14.6x forward earnings) still reached about $242 by 2030, starting from about $8 above Monday’s close.
Jim Cramer said on Mad Money that Morgan Stanley is “the lead underwriter for the Anthropic IPO,” which he said is “supposed to come in November.” That would help the quarter’s weakest line, equity underwriting.
The risk is the one Pick named: if rates and conflict overseas keep deals on hold while equities trading cools, 2027 could be that down year.
My take: This is a buy for patient investors. Most of the drop is the sector repricing on higher yields, and the business just had a record wealth quarter.
Of course, the fourth-quarter report in mid-January will show whether September’s slowdown stuck. Wealth revenue near $9 billion would keep the floor in place.
So what is Morgan Stanley stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Morgan Stanley could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
