Morgan Stanley (MS) is a Zacks Rank #5 (Strong Sell) that provides various financial products and services to corporations, governments, financial institutions, and individuals.

The stock is trading near lows as earnings approach next week. Investors should be cautious as the price action does not look great ahead of the print. Additionally, analyst estimates have been falling for the last few months.

About the Company

Morgan Stanley is one of the most recognizable names on Wall Street. It was founded in 1924 and is headquartered in New York, New York.The company employs over 80,000 people.

The company’s business is divided into three segments:

The Institutional Securities segment contributed 45.5% of total net revenues in 2022 and includes activities such as capital raising, corporate lending, trading, and market-making.

The Wealth Management segment also accounted for 45.5% of 2022 revenues.  It provides brokerage and investment advisory services covering various investment alternatives.

The Investment Management segment is the smallest, bringing in 9% of revenues. It provides global asset management products and services in equity, fixed-income, and alternative investments.

MS isvalued at $130 billion and has a Forward PE of 14. The stock holds Zacks Style Scores of “F” in Growth, Momentum, and Value. The stock pays a dividend of 4.3%.

Q2 Earnings

Morgan Stanley last reported in July, seeing an 8% EPS beat. The company beat on revenues and the Wealth and Management segment added $100B in new assets.

However, other areas including Institutional securities, fixed income, equity revenue and investment management were down year over year.

Management commented that the firm delivered solid results in a challenging market environment. While this was certainly true for Q2, analyst have been lowering estimates for the upcoming quarter and beyond.

Estimates

Over the last 90 days, numbers for the current quarter have been taken down from $1.45 to $1.28, or 12%.

For the current year, analysts have lowered estimates by 8% over that same time frame.

Looking at the longer term, numbers are going lower as well. For next year, estimates have fallen from $6.98 to $6.82 over the last 30 days or almost 2%.

The company will report on October 18^th and investors should be aware of this momentum lower. While expectations are low an earnings miss could bring the stock to new 2023 lows.

Technical Take

Over the last two years, Morgan Stanely has traded between $70 and $105. The stock now sits at the bottom of that range and is at lows of the year, down 8% in 2023.

While it might be tempting to buy into the pullback, the stock is well below its moving averages. The 200-day is at $88, while the 50-day is at $84.

Investors should be patient into the print and see if things improve. If the momentum lower continues, the stock could fall below $70 and hit halfway back from the Covid-lows to highs, which is $68.

In Summary

Morgan Stanley and other banks continue to display terrible price action. Trading at 2023 lows going into earnings is not a bullish sign and investors should be patient.

For those interested in the space, a better option might be Interactive Brokers (IBKR). The stock is a Zacks Rank #3 (Hold) that is trading close to all-time highs.  

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