We've seen winners and losers alike crop up in the age of coronavirus, but perhaps one of the biggest surprises is Morgan Stanley (NYSE:MS). The company recently brought out an earnings report, and the word around that report is “beat.” Estimates on all sides buckled like dust in the wind, and the picture for the full year was also significantly improved.
A Hand Full of Aces
The biggest immediate point to the Morgan Stanley earnings report is substantial wins in both earnings and revenue. The company reported a profit of $1.81 per share, which not only destroyed estimates at Refinitiv, it also walloped the figures from this time last year. Refinitiv was looking for a $1.27 per share profit, and this year's figures were up 51% from the same time last year.
Revenue also delivered significant wins, with $13.64 billion coming in against estimates of $11.54 billion. A look at individual sectors in Morgan Stanley's business showed that every part of the business was doing wonderfully. Investment banking by itself brought in $2.3 billion in revenue, which was well over the $1.81 billion expected by FactSet estimates. Equities trading brought in $2.49 billion, well over the expected $2.14 billion. Fixed income trading also topped estimates. The absolute winner for the company, however, was wealth management, which brought in a little better than a third of the company's revenue, with $5.68 billion.
Unsurprised Analysts Littering the Field
On the analyst front, meanwhile—based on our latest research—you'll likely find that most of the field wasn't surprised by this outcome. Not only is Morgan Stanley currently rated a “buy” by analysts, it's been that way for the last six months, and ratios have changed very little either way. There hasn't been a “sell” rating on the stock in the last six months, and both “hold” and “buy” ratings have only swung a maximum of two ratings each in the last six months. Six months ago, the company held seven “hold” ratings and 16 “buy”. Today, it's eight “hold” and 15 “buy.” Last month, it was nine “hold” and 14 “buy”.
Meanwhile, the price target has only been tracking upward as well. Six months ago, it sat at $53.76 before going to $55.86 and then to $57.50. Today, it sits at $61.57, and actually represents the first time in six months that the aggregate price target reflects downside potential. Morgan Stanley stock is currently trading at $76.44, which shows a clear disconnect between what the stock is doing right now and what it's expected to do. There have only been four adjustments made so far this year, and two featured price hike increases. Piper Sandler went from $54 to $76, and Deutsche Bank Aktiengesellschaft went from $53 to $68.
A Dependent, but Mostly Dependable, Result
We know that Morgan Stanley has turned in quite a year, and given that this was done during a pandemic year, it's all the more impressive. The question that remains, however, is what does Morgan Stanley do for an encore here? How does it follow up an impressive year going into 2021?
That's a question that Morgan Stanley is likely to have a difficult time answering. Sure, it's still going to be relied upon for its insight going forward. Its status as an analyst is widely known and well-respected. Its ability to trade will carry on and it will likely keep handling investments and wealth management for some time to come.
However, it's important to note that the conditions seen in the gains of 2020 aren't likely to be repeated, at least not to the extent that we've seen so far. With coronavirus vaccines and treatment options rapidly rolling out, the notion of wide-scale lockdowns seems much less likely to go off like it did back in 2020. There's also likely at least some resistance set toward such moves, and we've already seen that happen in individual counties. Yet with officials from Andrew Cuomo to Lori Lightfoot coming out in favor of reopening, large-scale, long-term lockdowns seem a lot less likely.
Certainly Morgan Stanley benefited somewhat from the coronavirus conditions, as people stayed in and did some day trading when work was unavailable due to government-mandated closures. And certainly, Morgan Stanley will continue to provide a wide range of excellent services that people will use. Use like the levels we saw in 2020, meanwhile, may be much more difficult to produce than anyone expects, and that could be a drag on future gains down the line. Still though, for a reliable company—and a likely reliable annual dividend—Morgan Stanley is likely to be a safe buy going forward.
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