Morgan Stanley’s Outlook Improving, Two Wall Street Firms Say
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1/04/10By BRENDAN CONWAY
Analysts at two major Wall Street firms upgraded their investment ratings on Morgan Stanley shares Monday morning, with predictions that the investment bank is set for a better 2010, though not immediately.
Credit Suisse Group analyst Howard Chen said that Morgan Stanley’s earnings could top $3.50 a share this year thanks to a better outlook for the bank’s trading revenues and the effects of the Morgan Stanley Smith Barney joint venture.
The year 2010 “will represent an inflection point” for profitability, operating margins and book value, driving the stock upward, he predicted in a note co-authored by analyst Ross Seiden. Credit Suisse also raised its price target on the stock to $38 from $32.
Mr. Chen was joined by UBS AG’s Glenn Schorr, who predicted the company’s “strong” capital position, a growing investment banking pipeline and rebuilding in fixed income, currency and commodities and prime brokerage are reasons for optimism. He added that the Smith Barney integration “appears to be on track.” The note was co-authored by analyst Keith Murray.
Both firms were clear to stress that they don’t see much improvement in the near term.
The Credit Suisse analysts said they anticipate a weak showing for the fiscal fourth quarter. Morgan Stanley reports its quarterly earnings on Jan. 21. UBS’s Mr. Schorr said earnings “will likely still be sluggish.”
The upgrades follow a number of downward adjustments on estimates for major Wall Street firms in recent weeks, predicated on lower-than-expected trading volumes. Most recently, analysts at Bank of America Merrill Lynch said trading momentum for the fourth quarter was “fizzling” and cut its figures for Goldman Sachs Group, Morgan Stanley, Citigroup Inc. and J.P. Morgan Chase & Co.
The UBS investment rating on Morgan Stanley’s stock was raised to buy from neutral, while Credit Suisse’s was moved to outperform from neutral.
Shares in Morgan Stanley were up 4.2% at $30.83 in recent trading.
Write to Brendan Conway at brendan.conway@dowjones.com
