Morgan Stanley lifts KE Holdings stock target to $27, keeps Overweight

On Wednesday, Morgan Stanley (NYSE:MS) updated its financial outlook on KE Holdings (NYSE: BEKE), increasing the price target to $27.00 from the previous $19.00 while sustaining an Overweight rating on the stock. The adjustment follows a valuation update to the year 2025 and a reduction in the weighted average cost of capital (WACC) from 14% to 12%. According to InvestingPro data, the stock has shown remarkable strength with a 67.84% return over the past year, while analyst targets currently range from $17.79 to $33.01.

Steven Tsai of Morgan Stanley adjusted the earnings projections for KE Holdings, accounting for a shortfall in the fourth quarter of 2024 earnings. The revised estimates show a decrease of 7% for 2025 and 1% for 2026. However, forecasts for subsequent years have been raised, with a 6% increase for 2027, 15% for 2028, 20% for 2029, and a notable 23% for 2030. These adjustments reflect the company’s operational leverage and the expected growth in new business ventures. InvestingPro analysis reveals the company has maintained strong revenue growth of 20.16% in the last twelve months, with current earnings per share at $0.49.

The new price target is based on a 23 times multiple of the company’s projected 2025 non-GAAP earnings per share. Morgan Stanley’s stance is that this valuation is warranted given KE Holdings’ anticipated compound annual growth rate (CAGR) of 19% in earnings from 2025 to 2028. Currently trading at a P/E ratio of 48.75, InvestingPro analysis suggests the stock is slightly overvalued compared to its Fair Value. For deeper insights into KE Holdings’ valuation and 17 additional ProTips, subscribers can access the comprehensive Pro Research Report.

KE Holdings, which operates in the real estate sector with a market capitalization of $28.09 billion, is expected to benefit from its operational efficiencies and expansion into new business areas. The updated price target and earnings estimates are indicative of Morgan Stanley’s confidence in the company’s growth trajectory and market performance in the coming years.

The Overweight rating suggests that Morgan Stanley believes KE Holdings stock will outperform the average total return of the stocks covered by the analyst in the sector over the next 12 to 18 months. This rating and price target update may influence investor sentiment and market activity for KE Holdings shares on the New York Stock Exchange.

In other recent news, KE Holdings reported fourth-quarter results with gross transaction value and revenue exceeding expectations, although non-GAAP earnings fell short due to a one-off accrual. Jefferies analyst Thomas Chong responded by lowering the company’s price target from $30.00 to $26.00 but maintained a Buy rating, indicating continued confidence in the company’s prospects. This comes as KE Holdings gains market share in the new home segment, which is expected to grow faster than existing home sales in the upcoming quarter.

Additionally, KE Holdings has been included in the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect programs. This inclusion allows investors in Mainland China to trade KE Holdings’ shares, potentially increasing the liquidity of its stock and expanding its investor base. The company’s strategic use of artificial intelligence to enhance agent performance and its commitment to the One Body Three Wings Strategy are seen as pivotal to its ongoing growth.

KE Holdings’ participation in the Stock Connect programs marks a significant milestone, enhancing its visibility in capital markets and providing greater access to a broader investor community. The inclusion is effective immediately, reflecting the company’s compliance with regulatory requirements necessary for cross-listing. These developments underscore KE Holdings’ growing prominence and business strength in the real estate sector.

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