Morgan Stanley Beats on Top and Bottom Line

Banking giant, Morgan Stanley (Ticker Symbol: MS), released earnings and revenue this week that were better than analysts were expecting. The multinational investment bank and financial services company reported an earnings per share beat of $1.27 per share vs. Wall Street analysts’ expectations of $1.11 per share. Additionally, Morgan Stanley reported a solid revenue beat that came in at $10.1 billion vs. Wall Street analysts’ expectations of $9.6 billion.

Morgan Stanley’s wealth management arm reported a slight miss producing $4.36 billion in revenue, which was slightly less than analysts were expecting at $4.39 billion. The company’s fixed income trading unit beat expectations posting $1.43 billion in revenue beating analysts’ expectations of $1.11 billion. Morgan Stanley’s equities trading arm reported a slight miss of $1.99 billion in revenue vs. $2.1 billion that analysts were expecting.

The above image is a weekly chart of Morgan Stanley’s stock price since the first quarter of 2011. The stock spent most of 2011 trading negatively before finding a small rally at the end of the year. Over the next year, the stock ​found additional price support around the $12.00 price level while putting in a double bottom reversal pattern.

Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Morgan Stanley’s case, one would take the bottom price from the double bottom pattern (roughly $12) and the price of the neckline from the pattern (roughly $24) then subtract them to get the difference ($12). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move (Neckline – Difference = Measured Move). In Morgan Stanley’s case, the projected price target from the double bottom pattern was $36.00, which the stock achieved roughly fifteen months after breaking out.

Morgan Stanley continued to rally, finding some price resistance around the $40.00 price level in the third quarter of 2015. The stock spent the next year pulling back over 40%, trading back down to the $24.00 level. At the beginning of 2017, the stock began to find some life and broke through its downtrend and reclaimed both its 100 and 200-week moving averages. Morgan Stanley proceeded to rally over 100% before finding resistance above near the $60.00 price level in the first quarter of 2018. The stock sold off for the remainder of the year and has been finding dynamic support at its 200-week moving average. Currently the stock is positive for the year and trading above both its 100 and 200-day moving averages.

(Chart above courtesy of ​​)

Based on a survey of 5 analysts offering 12-month price targets, the average price target for Morgan Stanley’s stock is $58.75. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $43.32.

Earlier this year, Morgan Stanley raised its dividend to .35 cents per share from .30 cents per share, which shows a 16% increase.  The company also increased its share buyback program, bringing the total up to $6 billion.

Investors in Morgan Stanley should look to their next earnings release on January 19th, 2020 for fresh news within the company.

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