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Wolfe Research analyst Steven Chubak upgraded Morgan Stanley (NYSE:MS) stock to Peer Perform from Underperform on Friday after a recent selloff appears to have made its risk-reward profile “much more balanced.”
Shares of the investment bank pulled back on Wednesday, when it turned in Q3 earnings that reflected softer-than-expected net interest income and higher-than-expected provision for credit losses against a backdrop of muted mergers-and-acquisitions activity.
Although the high interest-rate environment continued to hinder the wider investment-banking space, “we are seeing increasing evidence of M&A and underwriting calendars that are building,” Morgan Stanley Chairman and CEO James Gorman said during the company’s Q3 earnings call conference.
“And while we expect momentum to continue this year, given the fourth quarter has some seasonal considerations, we expect most of the activity to materialize in 2024. Meanwhile, it’s our job to control what we can control,” he added.
MS is on track to close out the week ended October 20 down over 7% lower, compared with the stock market’s 2.2% slide. Year-to-date, MS retreated 14.9%, while the S&P 500 climbed 11.9%.
Chubak argued the recent underperformance in the stock makes it “fairly valued, with earnings risk better reflected in consensus,” he wrote in a note. The sell-side analyst noted MS is trading at ~10.6 times his blended 2024/2025 EPS estimates.
MS edged up 0.6% in Friday morning trading.
The Peer Perform rate aligns with the SA Quant system rating of Hold and contrasts with the average Wall Street analyst rating of Buy.
