Goldman vs. Morgan Stanley: Which Stock Has Stronger Upside?

As global dealmaking activity picks up, the spotlight is once again on Wall Street’s most dominant investment banks: Goldman Sachs GS and Morgan Stanley MS. Both firms stand to benefit from an improving merger and acquisition (M&A) and capital markets environment, but the question for investors is clear: Which stock offers more upside from here?Let’s break it down based on current fundamentals, growth trajectory, and market positioning.Inside the Strategic Shifts Driving GS and MSGoldman is sharpening its focus on its core strengths in investment banking (IB) and trading while scaling back its consumer banking footprint. In sync with this, this month, GS reached an agreement with ING Bank Slaski to divest its Polish asset management firm, TFI. In the third quarter of 2025, Goldman completed the sale of its GM credit card business to Barclays. In 2024, it completed the sale of GreenSky. In 2023, it sold its Personal Financial Management unit to Creative Planning and also sold all of Marcus’ loan portfolio, part of its broader retreat from consumer banking. The strategic shift aligns with the company’s efforts to concentrate on areas where it has consistently demonstrated strong performance. By leveraging its leadership position, extensive operational scale and exceptional talent, the company aims to strengthen its core businesses and drive growth in areas where it has a competitive edge.In contrast, Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, such as Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction. Also, Morgan Stanley recently announced an agreement to acquire EquityZen in an effort to tap the rapidly growing private markets landscape. These moves have bolstered its diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ aggregate contribution to net revenues surged to more than 55% in 2024 from 26% in 2010. In the first nine months of 2025, their aggregate contribution to net revenues was 53%.Both firms faced headwinds in 2022 and 2023, as deal activity slowed dramatically, leading to declines in earnings due to weaker IB revenues. However, 2024 marked a turnaround, with both companies' investment banking (IB) business continuing to build on its momentum in 2025, buoyed by a resurgence in global dealmaking activity. Goldman reported IB fees of $6.8 billion, up 19% year over year in the first nine months of 2025.GS has continued to maintain its dominant position in advised and completed M&A deals this year. Notably, given its commanding share of announced deal value, paired with favorable macroeconomic tailwinds, could make 2025 one of the Goldman's strongest M&A years in decades.On the other hand, MS' total IB fees (in the Institutional Securities division) grew 14% year over year in the first nine months of 2025. A healthy IB pipeline, combined with an active M&A market, will help it capitalize amid the changing macroeconomic situation. Given their prominent roles in M&A advisory and underwriting, both Goldman and Morgan Stanley are well-positioned to benefit from the rising IB revenues.Examining Capital Return Strategies at GS and MSBoth Goldman and Morgan Stanley cleared the Federal Reserve’s 2025 stress test, indicating that the banks could withstand a severe recession with plenty of capital on hand to absorb hundreds of billions in losses. Post-clearing the stress test, both companies announced their intention to return excess capital to shareholders via dividends and share repurchases. Morgan Stanley announced an 8% hike in its quarterly dividend to $1.00 per share. The company has increased its dividend five times in the last five years, with an annualized growth rate of 20.35%. Similarly, Goldman raised its dividend by 33% to $4 per share. GS has raised dividends four times in the last five years, with an annualized growth rate of 21.85%.At present, MS has a dividend yield of 2.42%, which is higher than the industry average of 1.09% and Goldman’s yield of 1.99%. Dividend YieldImage Source: Zacks Investment ResearchBoth MS and GS enjoy a decent liquidity position. As of Sept. 30, 2025, the company 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. On the other hand, Goldman's cash and cash equivalents were $169 billion as of Sept. 30, 2025. As of the same date, total unsecured debt (comprising long-term and short-term borrowings) was $350 billion. Out of this, only $73 billion were near-term borrowings.Stock Performance and Valuation: Goldman vs. Morgan StanleyOver the past three months, Goldman shares have gained 7.6%, underperforming Morgan Stanley’s 11.4% rise. In comparison, the Zacks Investment Bank industry is up 3%.Price PerformanceImage Source: Zacks Investment ResearchIn terms of valuation, Goldman holds a notable advantage over Morgan Stanley, with a significant gap between the two. Goldman’s trailing 12-month price-to-earnings (P/E) ratio is 14.78X, compared with Morgan Stanley’s 16.11X. Price-to-Earnings F12MImage Source: Zacks Investment ResearchFurther, GS stock is trading at a discount compared with the industry’s trailing 12-month P/TBV ratio of 14.09X. Here, GS holds an edge over MS stock.Earnings Momentum Shifts: Where GS and MS Are HeadedThe Zacks Consensus Estimate for Goldman’s 2025 and 2026 earnings implies a year-over-year increase of 20.6% and 12.2%, respectively. The earnings estimates for both years have moved down over the past seven days.Estimate Revision TrendImage Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Morgan Stanley’s 2025 and 2026 earnings implies a year-over-year rise of 22.7% and 5.8%, respectively. Earnings estimates for 2025 have moved upward over the past seven days.Estimate Revision TrendImage Source: Zacks Investment Research Final Thoughts on GS & MS Investable AnalysisWhile both Goldman and Morgan Stanley stand to benefit from the ongoing rebound in M&A and capital markets activity, Morgan Stanley ultimately offers the more attractive upside given its strategic positioning, earnings trajectory, and shareholder-friendly approach.Goldman’s renewed focus on its core strengths positions it well to capitalize on a surging dealmaking environment. However, it remains more sensitive to cyclicality in capital markets, and its earnings estimates have recently trended downward, signaling tempered near-term expectations.Morgan Stanley, on the other hand, has successfully transformed itself into a more balanced and durable franchise. Its wealth and asset management engine now drives over half its revenues, offering stability and recurring fee income that reduces reliance on IB cycles. This diversification has supported stronger estimate revisions, with earnings expectations for 2025 moving higher. The firm also outpaces GS in dividend yield and continues to demonstrate consistent capital-return discipline. Coupled with its superior recent share price performance and upside estimate revisions, MS shows stronger momentum heading into the next leg of the cycle.At present, Morgan Stanley sports a Zacks Rank #1 (Strong Buy), while Goldman carries a Zacks Rank of 3 (Hold). 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Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks