[Updated 8/19/2021] Morgan Stanley Replace
Morgan Stanley’s inventory (NYSE: MS) has gained 53% YTD, and at its present value of $101 per share, it’s buying and selling barely above its honest worth of 100 – Trefis’ estimate for Morgan Stanley’s valuation. The financial institution just lately launched its second-quarter FY2021 outcomes, beating the earnings and revenues expectations. It reported whole revenues of $14.Eight billion – up 8% y-o-y, primarily pushed by a 92% y-o-y leap in funding administration and a 30% enhance in wealth administration companies. The expansion was partially offset by a 14% drop within the institutional securities section, primarily because of a 45% decline in FICC (fastened revenue, foreign money, and commodity) buying and selling revenues. Nonetheless, sturdy development in fairness buying and selling and funding banking companies was in a position to considerably assist the section. Altogether, it translated right into a 12% y-o-y enhance within the adjusted web revenue to $3.Four billion.
The corporate’s revenues of $48.2 billion in 2020 have been 16% above the year-ago interval. The financial institution reported a 27% y-o-y development within the institutional securities section (gross sales & buying and selling and funding banking), because of the unusually excessive buying and selling volumes and a leap in underwriting deal volumes. Additional, the wealth administration unit recorded a 7% development within the yr pushed by asset development – the section benefited from the acquisition of E*TRADE within the final quarter of 2020. The identical development continued within the first quarter of 2021, additionally. Nonetheless, the gross sales & buying and selling revenues suffered within the second quarter, resulting in a decline within the institutional securities revenues. That mentioned, the gross sales & buying and selling and funding banking revenues are more likely to normalize over the next quarters with restoration within the financial system. Nonetheless, the wealth administration and funding administration companies are anticipated to proceed their development trajectory, pushed by asset development. General, Morgan Stanley’s revenues are more likely to contact $57.Eight billion in FY2021 – up 20% y-o-y. Moreover, MS has doubled its frequent inventory dividend to $0.70 (efficient from the third quarter), along with a share repurchase plan of $12 billion legitimate for the subsequent 4 quarters. This coupled with greater revenues will seemingly allow the agency to report an EPS of $7.38 within the yr, which coupled with a P/E a number of of just under 14x, will result in the valuation of $100.
[Updated 7/06/2021] Morgan Stanley Inventory To Improve Quarterly Dividend By 100%
Morgan Stanley’s inventory (NYSE: MS) has gained 34% YTD, and at its present value of $92 per share, it’s buying and selling barely above its honest worth of 89 – Trefis’ estimate for Morgan Stanley’s valuation. The Federal Reserve launched its 2021 Complete Capital Evaluation and Evaluate (“CCAR”) stress take a look at outcomes on 24 June. Whereas the Fed imposed restrictions on dividend payout and share buyback by massive banks in 2020 to protect capital in mild of the Covid-19 disaster, it has cleared all of the 23 collaborating monetary establishments this yr. On account of the optimistic stress take a look at outcomes, Morgan Stanley has determined to extend its frequent inventory dividend by 100% to $0.70, starting the third quarter. Additional, it introduced a share repurchase plan of $12 billion, which will likely be legitimate for the subsequent 4 quarters.
Morgan Stanley reported whole web revenues of $48.2 billion for the complete yr 2020 – up 16% y-o-y. It was primarily because of sturdy development in gross sales & buying and selling funding banking companies pushed by greater buying and selling volumes and a leap in underwriting offers. Additional, the wealth administration and funding administration segments have seen important development in consumer property – the wealth administration division acquired a giant enhance from the acquisition of E*TRADE within the final quarter of 2020. The identical development continued within the first quarter of 2020 as effectively, with the agency reporting 66% y-o-y development in institutional securities (gross sales & buying and selling and funding banking) adopted by sturdy asset development in each wealth administration and funding administration segments. Transferring ahead, we count on the buying and selling volumes and underwriting deal volumes to normalize over the next quarters. Nonetheless, wealth and funding administration companies will seemingly drive development for the corporate, enabling Morgan Stanley’s revenues to the touch $54.6 billion in FY2021. Moreover, the agency is more likely to report a EPS of $6.89 within the yr, which coupled with a P/E a number of of just under 13x, will result in the valuation of $89.
[Updated 1/29/2021] Morgan Stanley Inventory Has Extra Room For Progress
Having gained near 150% for the reason that March 23 lows of the final yr, Morgan Stanley inventory (NYSE: MS) is buying and selling 23% above its pre-Covid peak in February 2020. That mentioned, we consider that it has extra scope for development. Trefis estimates Morgan Stanley’s valuation to be round $78 per share – round 15% above the present market value. Morgan Stanley is without doubt one of the high 5 U.S. funding banks and is a market chief within the equities buying and selling house. Its energy in gross sales & buying and selling was the first cause for its optimistic development within the yr, which was additionally evident within the just lately launched fourth-quarter outcomes. The financial institution reported higher than anticipated outcomes with whole revenues of $13.6 billion – up by 26% y-o-y. Gross sales & Buying and selling revenues jumped by 32% y-o-y coupled with a 46% development within the funding banking section. Notably, Wealth Administration revenues grew 24% y-o-y in This fall, pushed by the E*TRADE acquisition – E*TRADE was built-in with the wealth administration section firstly of October 2020.
Morgan Stanley reported revenues of $48.2 billion for the complete yr 2020 – up 16% y-o-y. It was primarily pushed by 27% y-o-y development within the Institutional Securities section, which incorporates each gross sales & buying and selling (up by 37%) and funding banking (up by 26%) companies. The financial institution has a powerful gross sales & buying and selling arm, which benefited from greater buying and selling volumes in 2020. Equally, its funding banking section gained from a leap in underwriting deal quantity. Nonetheless, because the financial situation improves, greater buying and selling and underwriting deal volumes are more likely to normalize within the subsequent quarters. That is more likely to damage Institutional Securities revenues in FY2021. Regardless of this, optimistic development in funding administration and wealth administration revenues are more likely to take Morgan Stanley’s revenues to round $49 billion in FY 2021 – barely above the 2020 determine.
Regardless of the Covid-19 disaster, the financial institution reported a 23% y-o-y enchancment in its adjusted web revenue determine in 2020. The expansion was partly because of greater revenues and partly pushed by decrease working bills as a % of revenues. This led to an EPS of $6.47 – up 25% as in comparison with 2019. Nonetheless, we count on the online revenue margin to barely undergo in FY2021, lowering the financial institution’s EPS determine to $6.06. Moreover, the financial institution is more likely to begin its share repurchase program from the primary quarter of 2021. General, the EPS of $6.06 coupled with the P/E a number of of just under 13x will result in a valuation of round $78.
[Updated 11/20/2020] After Optimistic Q3 Outcomes, Morgan Stanley Inventory Is Pretty Priced
In view of greater than a 100% acquire for the reason that March backside, we consider Morgan Stanley inventory (NYSE: MS) has achieved its near-term potential. Trefis estimates Morgan Stanley’s valuation to be round $58 per share – marginally under the present market value. The corporate has benefited from energy in its gross sales & buying and selling arm, which has delivered higher than anticipated outcomes over the current quarters. In its just lately launched third-quarter 2020 outcomes, Morgan Stanley surpassed the consensus estimates and reported whole revenues of $11.66 billion – up 16% y-o-y, primarily pushed by a 35% y-o-y leap in gross sales & buying and selling revenues coupled with an 11% development within the funding banking section.
We count on the financial institution to report $44.Three billion in income for FY 2020 – 7% greater than the year-ago interval. Nonetheless, its web revenue is more likely to stay across the earlier yr degree because of greater working bills, barely bettering the EPS determine to $5.24 for FY 2020. Thereafter, Morgan Stanley’s revenues are anticipated to say no to $43.Eight billion in FY2021, primarily pushed by a drop in funding banking and gross sales & buying and selling enterprise. The funding banking big has accomplished the acquisition of E*TRADE on 2nd October 2020 in an all-stock transaction, which can additional add to its wealth administration enterprise. That is seemingly to enhance the wealth administration revenues within the subsequent yr, partially offsetting the weak spot in different segments. The EPS determine is more likely to stay round $5, which coupled with the P/E a number of of just under 12x will result in a valuation of $58.
[Updated 07/30/2020] Morgan Stanley Inventory Gained 83% Over Current Months, Is It Nonetheless Undervalued?
Morgan Stanley inventory (NYSE: MS) misplaced greater than 44% – dropping from $50 on the finish of 2019 to round $28 in late March – then spiked 83% to round $51 now. Because of this the inventory has touched the extent seen on the finish of 2019.
There have been two clear causes for this – The Covid-19 outbreak and financial slowdown meant that market expectations for 2020 and the near-term shopper demand dropped. This might trigger important losses for companies and people alike, impacting their mortgage compensation functionality and exposing Morgan Stanley to sizable wealth administration mortgage losses. The multi-billion-dollar Fed stimulus supplied a flooring, and the inventory restoration owes a lot to that.
However this isn’t the tip of the story for Morgan Stanley inventory
Trefis estimates Morgan Stanley’s valuation to be round $58 per share – about 15% above the present market value – primarily based on an upcoming set off defined under and one danger issue.
The set off is an improved trajectory for Morgan Stanley’s revenues over the second half of the yr. We count on the corporate to report $42.Four billion in revenues for 2020 – 2.4% greater than the determine for 2019. Our forecast stems from our perception that the financial system is more likely to open up in Q3. Additional, because the lockdown restrictions are easing in many of the world, shopper demand is more likely to choose up too. The corporate has derived optimistic development in Q1 and Q2 primarily because of energy in its buying and selling arm, adopted by greater funding banking revenues. This leap could possibly be attributed to the Fed stimulus, which set the ground for companies to lift company debt, benefiting each underwriting enterprise and the gross sales & buying and selling division of the financial institution. This has largely offset the impression of weak revenues in different segments. Whereas the buying and selling revenue is anticipated to say no as in comparison with the primary two quarters, it’s more likely to drive optimistic development within the second half as effectively. General, we see the corporate reporting an EPS within the vary of $4.92 for FY2020.
Thereafter, Morgan Stanley’s revenues are anticipated to barely drop to $42 billion in FY2021, primarily because of a drop within the gross sales & buying and selling enterprise. Additional, the financial institution has often invested in share repurchases and is probably going to purchase again inventory near 2019 ranges, resulting in an EPS of $5.02 for FY2021.
Lastly, how a lot ought to the market pay per greenback of Morgan Stanley’s earnings? Nicely, to earn near $5.02 per yr from a financial institution, you’d need to deposit about $555 in a financial savings account as we speak, so about 110x the specified earnings. At Morgan Stanley’s present share value of roughly $51, we’re speaking a few P/E a number of of simply above 10x. And we predict a determine nearer to 12x will likely be acceptable.
That mentioned, Funding Banks are using on the wave of upper buying and selling quantity and development in underwriting offers, which is a risky enterprise. Progress appears to be like much less promising, and long-term prospects are lower than rosy. What’s behind that?
The financial downturn may trigger important losses for companies and people alike, impacting their mortgage compensation functionality. This might end in sizable losses for Morgan Stanley, because it has a considerable mortgage portfolio of wealth administration loans. The financial institution generated round 43% of its revenues from the wealth administration enterprise in 2019. Additional, because the financial system slows down, it should seemingly turn into costly for the financial institution to draw funding, negatively impacting all its operations. We count on the financial institution’s web revenue margin to say no from 20.5% in 2019 to 17.7% by FY 2021.
The identical development is seen throughout Morgan Stanley’s peer – Citigroup. Its revenues are anticipated to profit from optimistic development in its buying and selling arm and funding banking enterprise in FY2020. Nonetheless, its margins are more likely to undergo because of build-up in provisions for credit score losses in anticipation of dangerous loans. This might clarify why Citigroup’s inventory at present has a value of just under $53 however appears to be like slated for an EPS of round $6.13 in FY2021.
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