Morgan Stanley’s stock has gained 2% YTD, lagging behind the S&P 500’s 14% rise. The stock is currently trading at $95 per share, which is 5% below Trefis’ fair value estimate of $100. Despite showing strong gains of 35% from early January 2021 to now, the stock has seen fluctuating returns over the past few years, underperforming the S&P 500 in 2023. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the benchmark index, providing better returns with less risk. Given the uncertain macroeconomic environment, there are concerns about whether Morgan Stanley could face a similar situation as in 2023 and underperform the S&P 500 in the next 12 months.
In the first quarter of FY 2024, Morgan Stanley exceeded street estimates by posting total revenues of $15.14 billion, up 4% year-over-year. This growth was mainly driven by increases in the institutional securities, wealth management, and investment management segments. The company also saw a favorable drop in total non-interest expenses as a percentage of revenues, leading to a 15% year-over-year improvement in adjusted net income to $3.27 billion. Despite a marginal increase in total revenues to $54.14 billion in FY 2023, a decline in adjusted net income to $8.5 billion was observed due to higher expenses as a percentage of revenues.
Looking ahead, Morgan Stanley is expected to continue this positive trend in the second quarter of FY 2024. The company’s revenues are estimated to reach around $57.76 billion for the full fiscal year, with an improved adjusted net income of $10.9 billion and an annual GAAP EPS of $6.88. With a P/E multiple slightly above 14x, this is projected to result in a valuation of $100 for the stock. Overall, the company is expected to maintain its growth momentum in the coming months.
Investors can consider investing in Trefis Market Beating Portfolios, which have consistently outperformed the S&P 500. By diversifying investments across a collection of high-quality stocks, investors can potentially achieve better returns with lower risk compared to individual stock picks. With the current uncertain economic environment, it is important for investors to carefully consider their investment strategies and align them with the market trends to maximize returns while minimizing risks. Additionally, staying informed about the financial performance and projections of companies like Morgan Stanley can help investors make well-informed decisions in their investment portfolios.
