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BMO raises Morgan Stanley stock target, maintains Outperform rating on Q1 earnings

EditorNatashya Angelica
Published 04/18/2024, 12:03 PM

On Thursday, BMO Capital Markets updated its outlook on Morgan Stanley (NYSE:MS), increasing the price target to $118 from the previous $115, while maintaining an Outperform rating on the stock. The adjustment comes in the wake of Morgan Stanley's first-quarter earnings for 2024, which surpassed expectations with a significant margin.

The firm's analyst cited a number of factors contributing to the positive reassessment, including higher-than-anticipated Institutional Securities revenues, which encompass investment banking fees and trading revenues.

Moreover, Wealth Management margins were better than expected, thanks to stable net interest income. The analyst also noted a reduction in non-compensation costs, a strategy referred to as "sweating the income statement."

Morgan Stanley's management remains optimistic about the future, suggesting that the current environment is just the beginning of a multi-year cycle in mergers and acquisitions. Furthermore, the company has been assertive in defending its anti-money laundering controls, indicating that associated costs have already been integrated into their current expense run-rate.

The new stock price target of $118 is based on a 2.6 times multiple of the estimated tangible common equity (TCE) for the year 2025. This estimate is a product of a 19% return on tangible common equity (RoTCE) and a 14 times sum-of-the-parts (SOTP) derived price-to-earnings (P/E) ratio. The analyst's revised estimates reflect an increase of up to 7% due to the favorable factors mentioned.

InvestingPro Insights

In light of BMO Capital Markets' recent update on Morgan Stanley (NYSE:MS), InvestingPro data and tips provide additional context for investors considering the stock. Morgan Stanley has demonstrated a commitment to shareholder returns, raising its dividend for 10 consecutive years and maintaining dividend payments for 32 years, showcasing the company's stability and reliability as an income-generating investment.

With a current dividend yield of 3.77%, investors can appreciate the company's ability to consistently return capital to shareholders.

InvestingPro data reveals a robust financial profile, with a market capitalization of $146.53 billion and a price-to-earnings (P/E) ratio of 16.23, which slightly adjusts to 15.54 when considering the last twelve months as of Q1 2024. This is complemented by a revenue growth of 2.92% over the same period, indicating a steady upward trajectory in the company's earnings.

Furthermore, analysts are optimistic about Morgan Stanley's profitability, with 8 analysts revising their earnings upwards for the upcoming period and the company being profitable over the last twelve months. This aligns with the company's performance over the longer term, where Morgan Stanley has seen a strong return over the last five years.

For those seeking a deeper dive into Morgan Stanley's financial health and future prospects, InvestingPro offers additional insights and metrics. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the 8 additional InvestingPro Tips available at:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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