Shares of Morgan Stanley (MS) are down 5.3% at the time of writing after five-star Wells Fargo analyst Mike Mayo downgraded the bank from Hold to Sell. Mayo said that Morgan Stanley’s current stock price doesn’t reflect the challenges it’s facing in its wealth and investment management divisions.
Mayo pointed out that Morgan Stanley has the highest forward P/E ratio of any big bank despite dealing with issues like slowing wealth inflows, declining net interest income, and increased insider sales. He also noted that Morgan Stanley doesn’t seem to benefit as much from a rebound in capital markets compared to Goldman Sachs (GS), but still trades at a higher valuation.
As a result, Mayo cut his price target for Morgan Stanley from $99 to $95 and lowered his earnings estimates for the next three years. He also mentioned that with Morgan Stanley’s high stock price, share buybacks aren’t as effective. In addition, while the bank’s improved wealth and asset management businesses are some of its strengths, Mayo warned that this advantage might slow down.
It’s worth noting that, so far, Mayo has enjoyed a 70% success rate on his ratings, with an average return of 15% per rating.
Is MS Stock a Buy or Sell?
Overall, analysts have a Moderate Buy consensus rating on MS stock based on eight Buys, 10 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 12% rally in its share price over the past year, the average MS price target of $111.43 per share implies 15.74% upside potential.
