By Peet Serfontein, Hashmeel Suka
Morgan Stanley is a global financial services firm providing a wide range of investment banking, securities, wealth management and advisory focused investment management services. The company's client base includes large corporations, governments, institutions as well as individuals.
FY22 saw a sharp deterioration in the bottom-line (-23%) on the back of a weaker top-line performance (-10%) and FY23 showed no meaningful improvement. The company has been impacted by generally lower asset and investment flows as well as reduced M&A activity amid broader market weakness.
The company has had a strong start to FY24, with adjusted earnings per share increasing 19% y/y in 1Q24, compared to expectations for a 2% decline. This performance was underpinned by better market conditions in the US and bodes well for growth going forward.
Technically, the stock price is forming a falling wedge pattern in a broader upward trend (refer to the first chart) - a bullish indicator. The pattern initially appears to be bearish (given the downward sloping trendlines) but is in fact indicative of fading downside momentum - which typically precedes a bullish reversal. Should the price breakout above the existing upper trendline, it will serve as strong evidence of an emerging upward trend.
The stock is trading above its 200-day simple moving average of ~$85.30 and we maintain a bullish stance.
Muted upside momentum, according to the MACD indicator as well as sidewards movement of the on-balance volume indicator, is supportive of our bullish view.
Share Information
| Share Code | MS US |
|---|---|
| Industry | Financial Services |
| Market Capital (USD) | 145 billion |
| One Year Total Return | 3.85% |
| Return Year-to-Date | 1-3.48% |
| Current Price (USD) | 89.14 |
| 52 Week High (USD) | 95.57 |
| 52 Week Low (USD) | 69.42 |
| Financial Year End | December |
| The stock price seems to be recovering well following last-week's sell-off. Various technical indicators are guiding for a sustained push toward the upside. |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 5.18 | 6.73 | 7.50 | 8.36 |
| Growth (%) | 29.92 | 11.46 | 11.45 | |
| Dividend Per Share (USD) | 3.25 | 3.50 | 3.67 | 3.79 |
| Growth (%) | 7.82 | 4.68 | 3.30 | |
| Forward PE (times) | 12.81 | 11.50 | 10.66 | |
| Forward Dividend Yield (%) | 3.99 | 4.15 | 4.25 | |
| The bottom line is expected to recover strongly during FY24 and maintain momentum over the medium term. | ||||
Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | CVX - Buy (Continue to hold) | VVX - Buy (Continue to hold) | KHC - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 147.89 | 45.19 | 37.16 |
| Current | 156.28 | 44.89 | 36.59 |
| Movement | 5.7% | -0.7% | -1.5% |
|
The price is holding above key support. The stock is testing its 200-day moving average. Fading upside momentum is a concern.
Our profit target is $167, with a stop-loss of $149.60. Exit the position around 28 June 2024 |
The price is making higher lows and higher highs and thus remains of interest. The stock is testing its 200-day moving average, with our counter-trend strategy remaining intact. Upside momentum has regained strength which is encouraging.
Our profit target is $52, with a trailing stop-loss of $43. Exit the position around 10 July 2024 |
A price developing a base pattern remains attractive. The stock remains above its 200-day moving average. Emerging upside momentum is supportive.
Our profit target is $43, with a trailing stop-loss of $35. Exit the position around 14 August 2024. |
| Share Name and position | VWO - Buy (Continue to hold) | PEP - Buy (Continue to hold) | PNW - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 41.57 | 171.44 | 73.02 |
| Current | 40.83 | 167.50 | 71.21 |
| Movement | -1.8% | -2.3% | -1.1% |
|
A developing symmetrical triangle remains of interest. The ETF is above the 200-day simple moving average. Fading upside price momentum is a concern.
Our profit target is $48, with a stop-loss of $40.50. Exit the position around 14 June 2024. |
Price action above key support remains of interest. The stock remains below its 200-day moving average though we maintain our counter trend strategy. Fading upside momentum is a concern.
Our profit target is $190, with a trailing stop-loss of $166.30. Exit the trade by 26 June 2024. |
Price action developing a symmetrical triangle remain remains of interest. The stock remains below its 200-day moving average, and we maintain our counter trend strategy. Fading upside momentum remains a concern.
Our profit target is $81, with a trailing stop-loss of $70. Exit the trade by 5 July 2024. |
