Morgan Stanley's (MS) top stock strategist, Mike Wilson, believes the worst is almost over. In an interview with CNBC , he said that the market's correction is in its "final innings" and that things should start to look better in a few weeks. Wilson thinks investors have already priced in most of the bad news since June, including AI spending fears, wars, and the upcoming U.S. elections. As per his estimates, the S&P 500 ($SPX) could hit 8,500 by mid-2027. This is roughly 11.5% above its Oct. 23 close and even above Morgan Stanley's official 8,300 target. I think whether his prediction turns out to be accurate matters a lot for Morgan Stanley too.
Why Morgan Stanley Wins If Wilson Is Right
Morgan Stanley makes a lot of its money by charging fees on the money clients invest with it. When the stocks go up, those clients' accounts get bigger, so the fees get bigger as well. Clients now have a record $10.5 trillion with the firm, including about $3.2 trillion in accounts where they pay ongoing fees. Last quarter, its wealth business brought in $9.1 billion, also a record. This is what the company makes by helping people invest and manage their money through its financial advisors and its E*Trade platform.
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When I covered Morgan Stanley in April, its fee-based wealth revenue looked under pressure. Now, just a few months later, the company is posting records. Return on tangible common equity came in at 22.6%, beating its own goal of 20%. Overall, if Wilson is right, I think Morgan Stanley's own stock ends up being a big beneficiary of a market recovery.
About Morgan Stanley Stock
Morgan Stanley is a financial services company that serves businesses, governments, financial institutions, and individuals. The company helps businesses raise money, advises them on mergers and acquisitions, and provides investment banking services. It also offers stock and bond trading, financing, brokerage, and market research services. Founded in 1924, the company is headquartered in New York.
Morgan Stanley was up 14% over the past year. The year hasn't been a steady climb, though. The stock fell to roughly $155 in early spring, then staged a sharp rally through the middle of the year to a peak near $230, close to its 52-week high of $232.25. Since then, it has given back much of that gain, and it now trades about 19% below that peak.
Morgan Stanley's valuation looks fair to me. The forward price-to-earnings (P/E) of 13.95x sits about 4% below its 5-year average of 14.49x. The forward price-to-book (P/B) ratio of 2.60x, though, is about 33% above its average of 1.96x. That is well above its historical norms, but I still think the premium makes sense. Investors pay more for banks that make strong returns, and Morgan Stanley's 22.6% beat its own goal. The EPS outlook is a different story, which is why the P/E isn't higher. Analysts expect earnings to grow about 26% this year and slow down to 6% to 7% in 2027 and 2028, before marginally turning negative in 2029.
Beats Earnings Estimates as Revenue Hits $20.3 Billion
Morgan Stanley reported its third-quarter fiscal 2026 earnings on Oct. 14. It reported revenue of $20.34 billion, up from the prior year and above the $19.96 billion forecast. The earnings per share came in at $3.03, comfortably beating the Wall Street consensus of $2.94. The bank's wealth management unit remained the main engine of growth, while institutional securities also posted solid gains.
Looking forward, management said fourth-quarter net interest income is expected to rise modestly, depending on rates and client behavior. The company also said the tax rate should be slightly above the third-quarter level of 23.3%, while full-year tax guidance remains unchanged. In wealth management, Morgan Stanley expects deposits, fee-based flows, and net new assets to keep growing over time.
What Do Analysts Expect for MS Stock?
Recently, Freedom Broker lowered its price target on MS from $245 to $210 but maintained a "Buy" rating on the stock. The firm said the company's Q3 results beat expectations, but by a smaller margin than in previous quarters. The firm also lowered its valuation to account for high interest rates. Similarly, BMO Capital also lowered the firm's price target from $215 to $210 and reiterated a "Buy" rating.
Based on 27 Wall Street analysts covering the stock, MS holds a consensus "Moderate Buy" rating. The mean price target of $218.50 reflects 18% upside from current levels.
On the date of publication, Jabran Kundi did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
