Global M&A Engine Revs Up: How to Play Morgan Stanley Stock?

After several false starts, global mergers & acquisitions (M&As) finally witnessed a decisive upswing in the second half of 2025 amid easier regulation hopes and inflation pressures, setting the stage for a stronger 2026. Hence, the well-known investment bank, Morgan Stanley MS, is in the spotlight. Per Dealogic, global M&As surged 41% year over year to $4.81 trillion last year, led by a record 70 megadeals. In 2026, M&As are likely to shift from high-risk transformational deals to de-conglomeration and buy-and-build strategies. This back-to-basics focus will likely lift mid-market activity through smaller, synergy-rich add-ons and faster tech integration. With solid GDP growth and a potential Fed rate cut, financing conditions are improving and strategic activity will continue rising.Against the bright industry prospects, Morgan Stanley is expected to be a winner this year. The company’s investment banking (IB) revenues were $5.2 billion in the first nine months of 2025, up 15% year over year, riding a wave of deal-making and IPO activity. On the third-quarter 2025 earnings call, Morgan Stanley CEO Ted Pick said that the improving environment supported strategic M&As and renewed financing activity. While being cautious, remarking that “whether we are entering a golden age of investment banking remains to be seen,” he noted that IB activity should continue to rise over the next couple of years. Going forward, a healthy IB pipeline, an active M&A market and Morgan Stanley’s strong franchise position enable it to capitalize on the improving macro backdrop.Other Growth Catalysts for Morgan Stanley in 2026Increased Focus on Wealth & Asset Management Operations: Morgan Stanley has lowered its reliance on capital markets for income generation. It is now focusing on expanding its wealth and asset management operations with buyouts of Eaton Vance, E*Trade Financial and Shareworks. Further, in October 2025, the company agreed to acquire EquityZen to tap the rapidly growing private markets landscape. These moves bolster the company’s diversification efforts, enhance stability and create a more balanced revenue stream across market cycles.The wealth and asset management businesses’ aggregate contribution to total net revenues jumped to more than 55% in 2024 from 26% in 2010. Additionally, the Wealth Management (WM) segment’s total client assets witnessed a five-year (2019-2024) compound annual growth rate (CAGR) of 18.1%, while the Investment Management (IM) segment’s total assets under management saw a CAGR of 24.7%. The momentum is expected to continue as the operating environment becomes more favorable, given greater clarity on trade and tariffs.Strategic Collaborations: MS’ partnership with Mitsubishi UFJ Financial Group, Inc. MUFG will likely continue to support its profitability. In 2023, the companies announced plans to deepen their 15-year alliance by merging certain operations within their Japanese brokerage joint ventures. The new partnership saw combined Japanese equity research, sales and execution services for institutional clients at Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities. Also, their equity underwriting business has been rearranged between the two brokerage units. These efforts will solidify the company’s position in Japan’s market.This has helped Morgan Stanley achieve record equity net revenues, particularly in Asia, through outperformance in prime brokerage and derivatives, led by solid client activity amid heightened volatility. The company’s Asia region revenues jumped 29% year over year to $7.27 billion in the first nine months of 2025.Further, in September 2025, Jed Finn, head of wealth management at Morgan Stanley, stated in an interview with Bloomberg that the company has collaborated with Zerohash, a cryptocurrency infrastructure provider, enabling E*TRADE clients to trade in popular cryptocurrencies starting in the first half of 2026. The initiative is expected to boost Morgan Stanley’s revenues through trading spreads, advisory fees on crypto allocations and future services, like custody and tokenization, and support client retention.Robust Balance Sheet Position: As of Sept. 30, 2025, Morgan Stanley had long-term debt of $324.1 billion, with $25.4 billion expected to mature over the next 12 months. The company’s average liquidity resources were $368.1 billion as of the same date.Morgan Stanley’s capital distribution plans have been impressive. Following the clearance of the 2025 stress test, it announced an 8% hike in quarterly dividend to $1.00 per share. It reauthorized a multi-year share repurchase program of up to $20 billion (no expiration date). The company has increased its dividend five times in the last five years, with an annualized growth rate of 20.4%.Given a solid liquidity position and earnings strength, Morgan Stanley is expected to be able to continue with efficient capital distribution activities, thereby enhancing shareholder value.Similarly, JPMorgan JPM increased its quarterly dividend six times during the last five years, while Goldman GS raised it five times during the same period. Further, JPMorgan has a share repurchase plan of $50 billion, and Goldman has a buyback plan of $40 billion.Morgan Stanley’s Earnings Prospects & Valuation AnalysisAnalysts are bullish on Morgan Stanley. Over the past month, the Zacks Consensus Estimate for 2025 and 2026 earnings has been revised upward to $9.88 and $10.42, respectively.Estimate Revision Trend Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Morgan Stanley’s 2025 and 2026 earnings implies year-over-year growth of 24.3% and 5.5%, respectively.From a valuation perspective, MS stock is currently trading at a forward 12-month price/earnings (P/E) of 17.87X, above the industry’s 15.23X. This indicates stretched valuation.Forward 12-Month P/E Image Source: Zacks Investment ResearchMeanwhile, JPMorgan and Goldman have a 12-month forward P/E of 15.88X and 17.14X, respectively. This shows that Morgan Stanley is expensive compared with its peers.Is Morgan Stanley a Smart Bet for 2026?Morgan Stanley shares have soared 45% in the past year, outperforming the industry. While it fared better than JPMorgan, it lagged Goldman.One-Year Price Performance Image Source: Zacks Investment ResearchMorgan Stanley’s efforts to become less dependent on capital markets to drive revenue growth and inorganic expansion efforts/strategic alliances, along with declining interest rates and a solid balance sheet, are expected to support its financials. Bullish analyst sentiments are another positive.However, rising expenses will likely hurt the company’s profitability in the near term. High reliance on trading revenues and a stretched valuation are other headwinds. Nonetheless, a robust M&A backdrop will likely drive Morgan Stanley’s financials. Hence, the stock looks like a compelling 2026 bet.At present, MS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Just Released: Zacks Top 10 Stocks for 2026Hurry – you can still get in early on our 10 top tickers for 2026. 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