Morgan Stanley (NYSE:MS) — This full-service financial services firm is one of the largest in the U.S., with public and corporate services in investment banking, securities, brokerage and wealth management.
Morgan Stanley had a 7% revenue increase in 2015; however, Standard & Poor’s forecasts a slight decline in revenues for 2016 and then a rebound in 2017. They look for an increase in earnings in 2017 to $3 per share, up from $2.45 this year, thanks to their capital markets division. They also expect margins to expand from 22.5% to 24%.
On July 21, S&P raised its 12-month price target on MS stock to $33, up a dollar, based on a forward price-to-earnings ratio of 11 times their 2016 estimates. Second-quarter earnings of 75 cents per share beat the S&P Capital IQ consensus by 16 cents — encouraging, since Q1 was weaker than forecast. Morgan Stanley’s cost reduction program, called Streamline, is on target to reduce costs by $1 billion by the end of 2017.
Morgan Stanley: A Look at the Chart
MS stock topped out above $41 in July 2015, then entered a bear channel downtrend. The decline terminated with a CBR reversal from my internal indicator on Feb. 9 of this year at about $23. Next came an intermediate recovery bull channel that ended yesterday with a breakout through the channel’s bearish resistance line at $30. The breakout was supported by higher-than-average volume and a buy signal from the MACD indicator. Prior to yesterday’s breakout, Morgan Stanley sliced through its 50- and 200-day moving averages with increasing accumulation.
Traders should try to buy MS stock under $30 with a short-term target of $35 for a possible return of more than 16%. Note that Morgan Stanley also pays an 80-cent dividend for an annual yield of 2.7%.
