HSBC Updates Morgan Stanley Stock as ‘Underperform’ End

Source: Investing Published 04/10/2024, 11:43

HSBC on Friday upgraded Morgan Stanley (NYSE: MS) stock to ‘Buy’ from ‘Hold’, with a price target of $118.00. The firm noted that Morgan Stanley stock has significantly underperformed Goldman Sachs Group Inc (NYSE: GS) and the broader market since 2021, but that trend may be changing.

HSBC highlighted the strength of Morgan Stanley’s investment banking and wealth management divisions.

which are expected to continue to benefit from a favorable market environment.

boosting the company’s financial performance.

The HSBC analyst also addressed concerns over net interest income (NII).

They believe that Morgan Stanley’s strong fee-based asset flows and accelerating growth in management fees within the Wealth Management sector overstate the situation.

This outlook indicates confidence in the company’s ability to generate revenue despite previous concerns.

HSBC’s outlook on Morgan Stanley shifts to positive as the analyst believes that the downward revisions in earnings that have led to weak performance over the past several years and negative sentiment among analysts have come to an end. The company’s rating indicates an expectation of stable or improved earnings for Morgan Stanley.

HSBC’s upgrade reflects HSBC’s belief in Morgan Stanley’s potential to outperform, even as it rates both Morgan Stanley and Goldman Sachs Group Inc. as “buy.” The preference for Morgan Stanley is described as modest.

but it indicates a shift in favor of the financial giant’s stock amid current market conditions.

HSBC’s new $118.00 price target for Morgan Stanley represents a significant increase.

indicating a positive outlook for the stock’s future performance. The upgrade is based on an assessment of various factors, including the company’s strength in investment banking and wealth management.

as well as an improved earnings outlook.

In other recent news, French President Emmanuel Macron has been in discussions with top Wall Street executives.

including Goldman Sachs Group Inc. (NYSE:GS) Chairman John Waldron and Blackstone CEO Stephen Schwarzman, about potential tax increases and fiscal challenges in France. Macron emphasized France’s attractiveness as an investment destination and discussed expanding business opportunities despite fiscal concerns.

Meanwhile, artificial intelligence startup OpenAI secured a $4 billion credit facility, backed by a consortium of banks including JPMorgan Chase & Co., Citigroup and Goldman Sachs Group Inc. The development comes shortly after the company announced a $6.6 billion investment.

boosting its financial resources for AI research and development.

Goldman Sachs Inc. was also in the spotlight for issuing a new Series Y preferred stock.

which resulted in changes to its securityholder rights and amendments to its articles of incorporation. The company’s latest filing with the Securities and Exchange Commission provides detailed information to shareholders and potential investors about the new preferred shares and their implications for existing securities.

In addition, Goldman Sachs Group Inc., along with Alphabet Inc. and several other prominent companies.

have agreed to pay a total of $3.8 million in fines to the U.S. Securities and Exchange Commission (SEC) for failing to file timely filings. The fines come as part of an enforcement action targeting delays in disclosures by companies and executives.

Finally, major banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., expect gold prices to continue rising through 2025. This is driven by renewed inflows into exchange-traded funds (ETFs) and expectations of further interest rate cuts by major central banks, including the U.S. Federal Reserve.

InvestingPro Insights

While HSBC’s update focuses on Morgan Stanley, it’s worth noting some key insights into its peer in the financial sector, Goldman Sachs Group Inc. According to InvestingPro data, Goldman Sachs Group Inc.’s current market cap is $160.95 billion and it trades at a price-to-earnings ratio of 15.45.

indicating a relatively attractive valuation relative to its earnings.

InvestingPro’s advice highlights that Goldman Sachs Group Inc. has been buying back its shares aggressively and has raised its dividend for 12 consecutive years.

demonstrating its commitment to returning value to shareholders. This is in line with the positive sentiment expressed in HSBC’s analysis of the financial sector.

Furthermore, Goldman Sachs Group Inc. is a prominent player in the capital markets industry.

supporting HSBC’s view of a favorable market environment that benefits investment banking activities. The company’s strong return over the past year, as noted in InvestingPro’s advice.

reinforces the positive momentum of the sector that HSBC is discussing in its Morgan Stanley upgrade.

For investors seeking a deeper understanding of Goldman Sachs Group Inc.’s financial health and market position, InvestingPro offers 12 additional tips, providing comprehensive analysis to guide investment decisions in this dynamic financial landscape.