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MS vs. GS: Which Stock Deserves Your Attention More?
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When we think of investment banks (IBs), two names immediately come to our minds – Morgan Stanley (MS - Free Report) and Goldman Sachs (GS - Free Report) .
Both MS and GS are the leading providers of underwriting and advisory services. Given the challenging operating backdrop for IBs, both have been struggling to improve profitability since last year.
This can also be seen from bearish investor sentiment toward the MS and GS stocks. Since the beginning of 2022, shares of Morgan Stanley and Goldman have lost 19.4% and 18.9%, respectively.
Price Performance
Image Source: Zacks Investment Research
Headwinds, including persistently high inflation, global aggressive monetary policy tightening, expectations of economic slowdown and geopolitical tensions, have resulted in a total crash of underwriting and advisory businesses. Though this year has been slightly better, things are far from normal.
Amid such a tough operating environment, let’s check which company – Morgan Stanley or Goldman – is better poised to counter this. Currently, both companies carry a Zacks Rank #3 (Hold). You can see tthe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Starting with the first half of 2023 financial performance, Morgan Stanley posted a 16% decline in net income, while the metric plunged 37% for Goldman. On the revenue front, Morgan Stanley’s top-line growth remained stable, while GS recorded a 7% fall in the same.
Now digging a bit deeper into revenue details, we see that Morgan Stanley’s Institutional Services business, which houses investment banking, witnessed a 10% decrease in net revenues in the first six months of 2023. The business accounts for 45% of the company’s net revenues.
For GS, its Global Banking and Markets business’ (accounting for almost 68% of firm’s total net revenues) total net revenues were down 15%.
Hence, we see that MS is less dependent on investment banking than Goldman. Notably, investment banking is not the primary revenue contributor for MS. The company’s Wealth Management business consisted of 47% of total net revenues in the first half of the year.
Therefore, Morgan Stanley has much more diversified revenue sources than GS. Wealth Management provides MS with a good balance when investment banking is subdued.
On the other hand, Goldman is currently in the middle of a business streamlining process. The company is refocusing on its core strengths of investment banking and trading while reducing its retail footprint. In sync with this, it announced the divestiture of its Personal Financial Management unit (expected to close by the end of this quarter) in August and is looking for bidders for GreenSky (its consumer lending platform). These efforts are expected to result in some one-time charges in the near term, thereby hampering growth.
So, which stock is worth keeping an eye on?
Presently, one can keep Morgan Stanley on their radar as it has a more balanced revenue mix, with a focus on both investment banking and wealth management businesses. This will help the company sustain profitability. With green shoots visible in investment banking and markets projecting further improvement next year, MS stands to gain from diversified revenues.
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MS vs. GS: Which Stock Deserves Your Attention More?
When we think of investment banks (IBs), two names immediately come to our minds – Morgan Stanley (MS - Free Report) and Goldman Sachs (GS - Free Report) .
Both MS and GS are the leading providers of underwriting and advisory services. Given the challenging operating backdrop for IBs, both have been struggling to improve profitability since last year.
This can also be seen from bearish investor sentiment toward the MS and GS stocks. Since the beginning of 2022, shares of Morgan Stanley and Goldman have lost 19.4% and 18.9%, respectively.
Price Performance
Image Source: Zacks Investment Research
Headwinds, including persistently high inflation, global aggressive monetary policy tightening, expectations of economic slowdown and geopolitical tensions, have resulted in a total crash of underwriting and advisory businesses. Though this year has been slightly better, things are far from normal.
Amid such a tough operating environment, let’s check which company – Morgan Stanley or Goldman – is better poised to counter this. Currently, both companies carry a Zacks Rank #3 (Hold). You can see tthe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Starting with the first half of 2023 financial performance, Morgan Stanley posted a 16% decline in net income, while the metric plunged 37% for Goldman. On the revenue front, Morgan Stanley’s top-line growth remained stable, while GS recorded a 7% fall in the same.
Now digging a bit deeper into revenue details, we see that Morgan Stanley’s Institutional Services business, which houses investment banking, witnessed a 10% decrease in net revenues in the first six months of 2023. The business accounts for 45% of the company’s net revenues.
For GS, its Global Banking and Markets business’ (accounting for almost 68% of firm’s total net revenues) total net revenues were down 15%.
Hence, we see that MS is less dependent on investment banking than Goldman. Notably, investment banking is not the primary revenue contributor for MS. The company’s Wealth Management business consisted of 47% of total net revenues in the first half of the year.
Therefore, Morgan Stanley has much more diversified revenue sources than GS. Wealth Management provides MS with a good balance when investment banking is subdued.
On the other hand, Goldman is currently in the middle of a business streamlining process. The company is refocusing on its core strengths of investment banking and trading while reducing its retail footprint. In sync with this, it announced the divestiture of its Personal Financial Management unit (expected to close by the end of this quarter) in August and is looking for bidders for GreenSky (its consumer lending platform). These efforts are expected to result in some one-time charges in the near term, thereby hampering growth.
So, which stock is worth keeping an eye on?
Presently, one can keep Morgan Stanley on their radar as it has a more balanced revenue mix, with a focus on both investment banking and wealth management businesses. This will help the company sustain profitability. With green shoots visible in investment banking and markets projecting further improvement next year, MS stands to gain from diversified revenues.