On Thursday, Wells Fargo updated its outlook on Morgan Stanley (NYSE:MS) shares, increasing the price target from $95.00 to $107.00. Despite the higher price target, the firm maintained an Underweight rating on the stock. The adjustment follows Morgan Stanley's third-quarter performance, which surpassed expectations, and an anticipation of more favorable trends ahead.
The Wells Fargo analyst has revised the estimated earnings per share (EPS) for Morgan Stanley for the year 2024 to $7.30, up from the previous estimate of $6.95. This change is a direct result of the company's stronger-than-expected third-quarter results. Moreover, the estimates for the following years have also been increased, with the 2025 EPS forecast rising by $0.50 to $8.00, and the 2026 EPS projection going up by $0.55 to $8.90.
The revised price target of $107.00 is based on a multiple of 12 times the estimated 2026 earnings. The analyst noted that the capital markets trends have been more positive than initially anticipated, which has also contributed to an improvement in margins. These factors are reflected in the updated earnings estimates.
The report by Wells Fargo indicates that while Morgan Stanley is expected to perform better than previously thought, there are still questions regarding the potential for further upside compared to current market expectations. The firm's analysis suggests that while Morgan Stanley's recent performance has been strong, investors may wish to remain cautious about the stock's future growth prospects.
In other recent news, Morgan Stanley showcased a robust financial performance in the third quarter of 2024, with revenues reaching $15.4 billion and net income standing at $3 billion. The company also reported an adjusted earnings per share (EPS) of $1.88, surpassing Evercore ISI's projection and the consensus estimate.
These positive results were primarily attributed to a 16% year-over-year increase in revenue, a notable rise in equity trading, and record wealth management revenue.
Evercore ISI upgraded its outlook on Morgan Stanley, raising the price target to $133.00 from the previous $115.00, while maintaining an Outperform rating on the stock. This adjustment follows the company's strong performance that exceeded analyst expectations. The Wealth and Investment Management division posted record revenues of $7.3 billion, and total client assets reached a staggering $7.6 trillion.
Despite a slight decrease in net interest income compared to the previous quarter, Morgan Stanley remains committed to its growth trajectory and aims to reach $10 trillion in total client assets. The firm also anticipates a gradual recovery in the IPO market and an increase in refinancing activity as interest rates decrease. These are recent developments from Morgan Stanley's third quarter 2024 earnings call.
InvestingPro Insights
Recent data from InvestingPro adds context to Wells Fargo's updated outlook on Morgan Stanley. The company's market capitalization stands at $192.65 billion, with a P/E ratio of 17.09, indicating a relatively moderate valuation compared to historical standards. Morgan Stanley's revenue for the last twelve months as of Q3 2024 was $58.28 billion, with a notable revenue growth of 16.48% in Q3 2024 compared to the previous quarter.
InvestingPro Tips highlight Morgan Stanley's strong financial position and market performance. The company has raised its dividend for 10 consecutive years, demonstrating a commitment to shareholder returns. This aligns with Wells Fargo's positive revision of earnings estimates. Additionally, Morgan Stanley is trading near its 52-week high, with a significant 54.85% price total return over the past year, reflecting the market's positive sentiment that Wells Fargo has noted.
It's worth mentioning that InvestingPro offers 13 additional tips for Morgan Stanley, providing investors with a more comprehensive analysis of the company's prospects. These insights could be particularly valuable given the analyst's cautious stance despite the increased price target.
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