Morgan Stanley (NYSE: MS) has had a YTD gain of 2%, lagging behind the S&P500’s 14% rise. Despite this, the stock is currently trading at $95 per share, which is 5% below its estimated fair value of $100 according to Trefis. Over a three-year period, the stock has shown strong gains, rising 35% from $70 in early January 2021 to its current price. However, the performance has not been consistent, with returns of 43% in 2021, -13% in 2022, and 10% in 2023, underperforming the S&P500 in the last year.
The first quarter of FY 2024 saw Morgan Stanley exceed street estimates with total revenues of $15.14 billion, up 4% year-over-year. This growth was mainly driven by a 3% increase in the institutional securities unit, a 5% rise in wealth management, and a 7% growth in investment management. The company also saw a favorable drop in total non-interest expenses as a % of revenues, leading to a 15% improvement in adjusted net income to $3.27 billion.
Despite a marginal increase in total revenues to $54.14 billion in FY 2023, Morgan Stanley saw a decline in adjusted net income to $8.5 billion. The growth in the wealth management division was offset by lower institutional securities revenues, with total expenses as a % of revenues increasing over the same period. Looking ahead to Q2 and beyond, Trefis estimates revenues to remain around $57.76 billion in FY2024, with adjusted net income expected to improve to $10.9 billion and an annual GAAP EPS of $6.88.
With the current uncertain macroeconomic environment, there is a question of whether Morgan Stanley will underperform the S&P500 over the next 12 months or see a strong jump in performance. The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P500 each year over the same period. This portfolio has shown better returns with less risk, providing a smoother performance compared to individual stocks, including heavyweights in the Financials sector and tech giants like GOOG, TSLA, and MSFT.
Investors can explore Trefis Market Beating Portfolios for potential investment opportunities. Despite the challenges faced by individual stocks in consistently beating the S&P500, Morgan Stanley’s financial performance in the first quarter of FY 2024 has been promising. With expectations of continued growth in revenues and improved adjusted net income, the company’s valuation is projected to reach $100, presenting a potential opportunity for investors.
