Morgan Stanley’s stock moved into the red on Wednesday while other bank stocks rose, as UBS cut its rating on the megabank to neutral from buy. UBS analyst Brennan Hawken cut his target price for Morgan Stanley
to $84 from $110 a share and said the stock appears to be fairly priced at the moment.
He also reduced his third-quarter earnings estimate for Morgan Stanley by 17% to $1.26 a share, which is below the current FactSet consensus forecast of $1.31 a share. Morgan Stanley’s stock fell 0.6%, while the Financial Select Sector SPDR exchange-traded fund
rose 0.2% and the SPDR S&P Bank ETF
rose 0.5%. Morgan Stanley will be the last of the six megabanks to report third-quarter earnings on Oct. 18. “We see headwinds that make it harder to exceed consensus estimates,” Hawken said. While the bank has successfully transformed to a focus on wealth management along with a solid wirehouse peer-leading growth profile, it’s facing other challenges, he said. “[Morgan Stanley] is confronted with obstacles such as deposit sorting/yield seeking, intense competition for talent, and a challenging revenue environment,” Hawken said. Wealth-management sweep deposits were down 43% year over year in the second quarter, and Hawken is forecasting another 7% drop in the third quarter.
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