Morgan Stanley’s stock (NYSE: MS) has lost 12% YTD, as compared to the 17% decline in the S&P500 over the same period. Further, the stock is currently trading at $86 per share, which is 11% below its fair value of $97 – Trefis’ estimate for Morgan Stanley’s valuation. The investment bank posted lower than expected results in the second quarter of 2022, with revenues decreasing by 11% y-o-y to $13.13 billion. Each of the three segments reported negative growth – institutional securities (down 14%), wealth management (down 6%), and investment management (down 17%). The institutional securities unit suffered due to a 55% drop in investment banking revenues driven by lower deal volumes, partially offset by a 49% jump in the FICC (fixed income, currency, and commodity) trading. Similarly, the investment management segment mainly suffered due to an 11% y-o-y drop in the total assets under management or supervision. Overall, the adjusted net income decreased 30% y-o-y to $2.4 billion. It was partly due to lower revenues and partly due to higher expenses as a % of revenues.
The company witnessed strong growth in 2021, with total revenues increasing by 23% y-o-y to $59.8 billion. However, the trend has changed in the first half of 2022. Notably, total revenues for the first two quarters declined 8% y-o-y to $27.9 billion. It was due to lower revenues in all the segments on a year-on-year basis. On the flip side, the top-line was partially offset by a 16% rise in the net interest income (NII). Altogether, the adjusted net income decreased 20% y-o-y to $5.9 billion.
Moving forward, we expect the investment banking revenues to remain under pressure over the subsequent quarters. All in all, Morgan Stanley’s revenues are estimated to remain around $54.9 billion in FY2022. Additionally, MS’s adjusted net income margin is likely to see a slight decrease in the year, leading to an adjusted net income of $12.17 billion and an annual EPS of $7.13. This coupled with a P/E multiple of just below 14x will lead to the valuation of $97.
With inflation rising and the Fed raising interest rates, Morgan Stanley has fallen 12% this year. Can it drop more? See how low can Morgan Stanley stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||0%||-17%||77%|
|Trefis Multi-Strategy Portfolio||0%||-16%||233%|
 Month-to-date and year-to-date as of 9/2/2022
 Cumulative total returns since the end of 2016