How to Play Morgan Stanley Stock as Global M&As Rebound?

While market uncertainties, driven by President Donald Trump’s trade war, elevated interest rates and broader geopolitical tensions posed challenges, they did not fully spoil what many bankers had anticipated would be a blockbuster year for global dealmaking. The year began on an optimistic note, but market sentiment cooled after Trump’s tariff policies launched on 'Liberation Day', casting a shadow over dealmaking. Yet, momentum has since rebounded, with activity picking up in recent months. This seems to be the right time to keep an eye on Morgan Stanley MS stock before it soars.Shares of MS, one of the most well-known global investment banks, have risen just 14.6% this year. In contrast, the company’s peers, Goldman Sachs GS and JPMorgan JPM, have fared much better, with their stocks gaining 26.4% and 23.5%, respectively.YTD Price Performance Image Source: Zacks Investment ResearchThe data available from Dealogic shows that despite an initial hiccup, the appetite for mergers and acquisitions (M&As) remains resilient in the face of market volatility, geopolitical tension and Trump’s shifting tariff landscape. Many deals that were put on hold are likely to come back once there is more certainty about the direction of the economy, as capital remains available. This will act as a tailwind for investment banks such as Morgan Stanley, JPMorgan and Goldman, which generate billions in revenues from M&A advisory fees.In the first quarter of 2025, industry-wide investment banking (IB) business witnessed better-than-expected activity, and Morgan Stanley performed well. The company’s total IB fees (in the Institutional Securities division) grew 7.7% year over year to $1.56 billion. MS’ second-quarter IB performance is likely to be muted due to the above-mentioned headwinds. The Zacks Consensus Estimate for IB fees (in the Institutional Securities division) is expected to be $1.49 billion, marking a sequential and year-over-year decline.Nonetheless, the second-half prospects look encouraging, and Morgan Stanley is likely to record a solid improvement in IB fees.Morgan Stanley’s Revenue Diversification EffortsMorgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, is a step in that direction. 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 jumped to more than 55% in 2024 from 26% in 2010. For the first quarter of 2025, the aggregate contribution to net revenues was 50.3%.In the first quarter, Morgan Stanley reported net outflows of $13.6 billion in the Investment Management division owing to volatile markets. On the other hand, assets under management or supervision rose 9.4% year over year to $1.6 trillion as of March 31, 2025. Further, the Wealth Management division’s total client assets increased 9.5% on a year-over-year basis to $6 billion.Morgan Stanley’s Strategic Alliance Driving GrowthMorgan Stanley’s partnership with Mitsubishi UFJ Financial Group, Inc. MUFG is expected to continue supporting its financials. In 2023, the companies announced plans to deepen their 15-year alliance by merging certain operations within their Japanese brokerage joint ventures.The new strategic alliance involves 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 the lucrative Japanese market.This helped MS achieve record equity net revenues in the first quarter of 2025, particularly in Asia, through outperformance in prime brokerage and derivatives driven by solid client activity amid heightened volatility. Further, the company’s Asia region revenues jumped 34.5% year over year to $2.35 billion during the quarter.Morgan Stanley’s Robust Balance SheetAs of March 31, 2025, Morgan Stanley had a long-term debt of $297 billion, with only approximately $23 billion expected to mature over the next 12 months. The company’s average liquidity resources were $351.7 billion as of the same date. Moreover, the company enjoys investment-grade long-term credit ratings of A1, A- and A+ from Moody’s, S&P Global Ratings and Fitch Ratings, respectively, and a stable outlook allows easy access to the debt market. Thus, a solid balance sheet position supports its enhanced capital distributions.After clearing the 2025 stress test, Morgan Stanley announced plans to increase its quarterly dividend by 8% to $1 per share. Also, the company has reauthorized its share repurchase program of up to $20 billion.  Over the past five years, the company has raised its dividends four times, with an annualized growth rate of 25.2%.Buy, Sell or Hold Morgan Stanley Stock Now?Over the past month, the Zacks Consensus Estimate for 2025 and 2026 earnings has been revised marginally lower to $8.54 and $9.26, 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 7.4% and 8.4%, respectively. From a valuation perspective, MS stock is currently trading at a forward 12-month price/earnings (P/E) of 16.19X. This is above the industry’s 14.96X.Price-to-Earnings F12M Image Source: Zacks Investment ResearchOn the other hand, JPMorgan and Goldman Sachs have a forward P/E of 15.54X and 15.31X, respectively. This reflects that Morgan Stanley is expensive compared to its peers.Morgan Stanley’s strong global presence and strategic focus on stable revenue streams provide a solid foundation for organic growth. Its diversified business model ensures resilience and growth potential, even in volatile market conditions. Resilient M&A pipelines and solid trading revenues are other positives.However, the company has been witnessing a rise in expenses. Though expenses declined in 2022, the metric recorded a five-year (ending 2024) CAGR of 7.8%, with the uptrend continuing in the first quarter of 2025. Expenses are likely to remain elevated, given higher compensation costs, inflationary pressure and inorganic growth efforts.While the current trend points toward a resurgence in global M&As, investors must keep a watch on the trends and macroeconomic developments before taking any investment decision. Also, the stock’s premium valuation and bearish analyst sentiment warrant careful consideration. Hence, MS stock is a cautious bet.Morgan Stanley currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Goldman Sachs Group, Inc. (GS): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Morgan Stanley (MS): Free Stock Analysis Report Mitsubishi UFJ Financial Group, Inc. (MUFG): 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