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Morgan Stanley Shares Up 32.4% YTD: How Will 2025 Turn Out for MS?
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One of the most well-known global investment banks, Morgan Stanley (MS - Free Report) , is generating considerable interest among investors. The company’s shares have rallied 32.4% this year.
Nonetheless, the stock is trading well below its peers — Goldman Sachs (GS - Free Report) and JPMorgan (JPM - Free Report) . It compares unfavorably with the industry while trading above the Zacks S&P 500 composite.
YTD Price Performance
Image Source: Zacks Investment Research
After a weak performance in the first half of 2024, Morgan Stanley shares gained traction as global mergers and acquisitions (M&A) witnessed a strong resurgence. In the first nine months of 2024, the company’s investment banking (IB) fees jumped 39% as clarity on several macroeconomic matters, the higher chances of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities.
Deal-making activities will continue to soar in 2025 as a more lenient approach is expected, with Donald Trump winning the U.S. presidential election. This, along with a favorable interest rate environment, strong economic growth and a solid deal pipeline, set the stage for a revitalized IB business next year. MS is poised to remain at the forefront as capital markets activity experiences a notable recovery.
Against this backdrop, investors wonder if they should buy, hold or sell Morgan Stanley shares now.
Bullish Analyst Sentiments for MS
Analysts seem to be bullish about Morgan Stanley’s prospects. Over the past month, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward.
Estimate Revision Trend
Image Source: Zacks Investment Research
This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects. Further, over the long term, the company’s earnings are expected to grow 15.1%.
The Zacks Consensus Estimate for Morgan Stanley’s 2024 and 2025 earnings implies year-over-year growth of 34.8% and 7.6%, respectively.
Earnings Estimates
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on ZacksEarnings Calendar.
Morgan Stanley Stock Looks Expensive
Given an impressive rally in MS shares, it appears slightly expensive relative to the industry. The stock is currently trading at the forward 12-month price/earnings (P/E) of 15.62X. This is above the industry’s 13.78X, reflecting a stretched valuation.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Further, MS stock is trading at a premium compared with GS and JPM. At present, GS and JPM are trading at a forward 12-month P/E of 13.19X and 14.15X, respectively.
What to Do With Morgan Stanley Stock Now?
Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction.
These moves have bolstered Morgan Stanley’s diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ contribution to net revenues jumped to more than 57% in 2023 from 26% in 2010.
MS continues to reward shareholders handsomely. As it cleared the 2024 stress test, the company announced an increase in its quarterly dividend by 8.8% to 92.5 cents per share. In the last five years, it increased dividends four times, with an annualized growth rate of 27.85%. It also reauthorized a new multi-year share repurchase program of up to $20 billion in July 2024. As of Sept. 30, 2024, approximately $19.25 billion shares remained available under the authorization.
The company’s global presence, rebound in the investment banking business and efforts to focus on less volatile revenue streams provide a solid base for organic growth. However, challenges like high interest rates for longer cannot be ignored. Also, the stock’s premium valuation indicates caution in the near term.
Image: Bigstock
Morgan Stanley Shares Up 32.4% YTD: How Will 2025 Turn Out for MS?
One of the most well-known global investment banks, Morgan Stanley (MS - Free Report) , is generating considerable interest among investors. The company’s shares have rallied 32.4% this year.
Nonetheless, the stock is trading well below its peers — Goldman Sachs (GS - Free Report) and JPMorgan (JPM - Free Report) . It compares unfavorably with the industry while trading above the Zacks S&P 500 composite.
YTD Price Performance
Image Source: Zacks Investment Research
After a weak performance in the first half of 2024, Morgan Stanley shares gained traction as global mergers and acquisitions (M&A) witnessed a strong resurgence. In the first nine months of 2024, the company’s investment banking (IB) fees jumped 39% as clarity on several macroeconomic matters, the higher chances of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities.
Deal-making activities will continue to soar in 2025 as a more lenient approach is expected, with Donald Trump winning the U.S. presidential election. This, along with a favorable interest rate environment, strong economic growth and a solid deal pipeline, set the stage for a revitalized IB business next year. MS is poised to remain at the forefront as capital markets activity experiences a notable recovery.
Against this backdrop, investors wonder if they should buy, hold or sell Morgan Stanley shares now.
Bullish Analyst Sentiments for MS
Analysts seem to be bullish about Morgan Stanley’s prospects. Over the past month, the Zacks Consensus Estimate for 2024 and 2025 earnings has moved upward.
Estimate Revision Trend
Image Source: Zacks Investment Research
This upward adjustment reflects a positive sentiment among analysts and suggests encouraging prospects. Further, over the long term, the company’s earnings are expected to grow 15.1%.
The Zacks Consensus Estimate for Morgan Stanley’s 2024 and 2025 earnings implies year-over-year growth of 34.8% and 7.6%, respectively.
Earnings Estimates
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
Morgan Stanley Stock Looks Expensive
Given an impressive rally in MS shares, it appears slightly expensive relative to the industry. The stock is currently trading at the forward 12-month price/earnings (P/E) of 15.62X. This is above the industry’s 13.78X, reflecting a stretched valuation.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Further, MS stock is trading at a premium compared with GS and JPM. At present, GS and JPM are trading at a forward 12-month P/E of 13.19X and 14.15X, respectively.
What to Do With Morgan Stanley Stock Now?
Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction.
These moves have bolstered Morgan Stanley’s diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ contribution to net revenues jumped to more than 57% in 2023 from 26% in 2010.
MS continues to reward shareholders handsomely. As it cleared the 2024 stress test, the company announced an increase in its quarterly dividend by 8.8% to 92.5 cents per share. In the last five years, it increased dividends four times, with an annualized growth rate of 27.85%. It also reauthorized a new multi-year share repurchase program of up to $20 billion in July 2024. As of Sept. 30, 2024, approximately $19.25 billion shares remained available under the authorization.
The company’s global presence, rebound in the investment banking business and efforts to focus on less volatile revenue streams provide a solid base for organic growth. However, challenges like high interest rates for longer cannot be ignored. Also, the stock’s premium valuation indicates caution in the near term.
Morgan Stanley currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.