Morgan Stanley’s stock (NYSE: MS) has lost 2% YTD, as compared to the 8% rise in the S&P500 over the same period. Further, the stock is currently trading at $84 per share, which is 14% below its fair value of $98 – Trefis’ estimate for Morgan Stanley’s valuation. The investment bank surpassed the consensus estimates in the first quarter of 2023, despite a 2% y-o-y drop in the net revenues to $14.5 billion. The top line suffered due to a 3% decrease in investment management, a 24% decline in investment banking, down 14% in equity trading, and decreasing 12% in FICC (fixed income, currency & commodity) trading businesses. That said, the wealth management unit posted an 11% y-o-y growth, primarily due to higher interest rates and loan growth. On the cost front, noninterest expenses as a % of revenues increased in the quarter. Overall, the adjusted net income was reduced by 20% y-o-y to $2.8 billion.
The company’s revenues fell by 10% y-o-y to $53.67 billion in FY 2022. It was driven by lower investment banking and equity trading revenues, partially offset by a 20% jump in FICC trading divisions. Further, the noninterest expenses increased in the year. Altogether, the adjusted net income decreased 28% y-o-y to $10.5 billion.
Moving forward, we expect the same trend to continue in Q2 2023. All in all, Morgan Stanley’s revenues are estimated to remain around $55.75 billion in FY2023. Additionally, MS’s adjusted net income margin is likely to remain around the same level as the previous year, leading to an adjusted net income of $11.20 billion and an annual GAAP EPS of $6.81. This coupled with a P/E multiple of just above 14x will lead to a valuation of $98.
|S&P 500 Return||-1%||8%||85%|
|Trefis Multi-Strategy Portfolio||-1%||8%||239%|
 Month-to-date and year-to-date as of 5/11/2023
 Cumulative total returns since the end of 2016