With shares of Morgan Stanley (NYSE:MS) trading around $29, is MS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.
T = Trends for a Stock’s Movement
Morgan Stanley is a global financial services company that, through its subsidiaries and affiliates, provides its products and services to a range of clients and customers: corporations, governments, financial institutions, and individuals. The company operates in three segments: institutional securities, global wealth management group, and asset management. Morgan Stanley provides financial advisory and capital-raising services; equity, fixed income, and alternative investments; and merchant banking services. It participates in an industry that powers most other types of businesses around the world.
Morgan Stanley appointed Patrick Delivanis to take over as investment banking head in the Middle East and North Africa, according to a person with knowledge of the matter who spoke to Bloomberg. Delivanis takes over with immediate effect from Klaus Froehlich and has worked for the New York-based bank in Dubai since 2007, according to the person, who asked not to be named by Bloomberg, as the information isn’t public. Froehlich becomes head of global capital markets for Germany and Austria, the person said to the news service. Morgan Stanley was the Middle East and Africa’s top M&A adviser last year, working on deals valued at $11.8 billion, according to data compiled by Bloomberg. Froehlich, in an interview last week, said the bank was predicting the return of initial public offerings worth more than $1 billion in the Persian Gulf this year after asset values and stock markets rallied.
T = Technicals on the Stock Chart Are Mixed
Morgan Stanley stock has been trending higher in recent months. The stock is currently trading sideways and may need time to stabilize. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Morgan Stanley is trading between its rising key averages, which signals neutral price action in the near-term.
Source: Thinkorswim
Taking a look at the implied volatility (red) and implied volatility skew levels of Morgan Stanley options may help determine if investors are bullish, neutral, or bearish.
|
Implied Volatility (IV) |
30-Day IV Percentile |
90-Day IV Percentile |
|
| Morgan Stanley options |
26.76% |
26% |
23% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts as compared to the last 30 and 90 trading days.
|
Put IV Skew |
Call IV Skew |
|
| March Options |
Average |
Average |
| April Options |
Average |
Average |
As of Tuesday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Morgan Stanley’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Morgan Stanley look like and more importantly, how did the markets like these numbers?
|
2013 Q4 |
2013 Q3 |
2013 Q2 |
2013 Q1 |
|
| Earnings Growth (Y-O-Y) |
-78.79% |
78.57% |
41.38% |
916.67% |
| Revenue Growth (Y-O-Y) |
11.43% |
7.44% |
22.49% |
17.64% |
| Earnings Reaction |
4.37% |
2.62% |
4.37% |
-5.4% |
Morgan Stanley has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Morgan Stanley’s recent earnings announcements.
P = Weak Relative Performance Versus Peers and Sector
How has Morgan Stanley stock done relative to its peers – UBS (NYSE:UBS), TD Ameritrade (NYSE:AMTD), and Charles Schwab (NYSE:SCHW) — and sector?
|
Morgan Stanley |
UBS |
TD Ameritrade |
Charles Schwab |
Sector |
|
| Year-to-Date Return |
-5.17% |
9.51% |
8.22% |
-0.15% |
4.1% |
Morgan Stanley has been a poor relative performer, year-to-date.
Conclusion
Morgan Stanley is a financial services company that provides service to consumers and companies across the globe. The company appointed Patrick Delivanis to take over as investment banking head in the Middle East and North Africa. The stock has been trending higher in the last year but is currently trading sideways. Over the last four quarters, earnings and revenues have been on the rise, which has left investors pleased about earnings announcements. Relative to its peers and sector, Morgan Stanley has been a poor relative year-to-date performer. Look for Morgan Stanley to OUTPERFORM.
Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.
More from Wall St. Cheat Sheet:
- 2013 Was a Good Year for the Wallet of Morgan Stanley’s CEO
- Legal Costs Hit Morgan Stanley in the Earnings
- Whisper Number: How Will Morgan Stanley’s Stock Move After Earnings?