Is MS Stock Worth Buying Post Q4 Earnings & Under Trump 2.0?

Zacks

01-27

One of the most well-known global investment banks, Morgan Stanley MS, is generating considerable interest among investors. The company’s shares have gained more than 5.5% since the release of its fourth-quarter and full-year 2024 results on Jan. 16. Further, the stock touched an all-time high of $139.04 on Friday.

Morgan Stanley’s quarterly top and bottom-line numbers easily outpaced the Zacks Consensus Estimate. This was driven by bumper deal-making and trading activities.

Before discussing Morgan Stanley stock’s investment worthiness, let’s check out its quarterly performance.

A Quick Glance at Morgan Stanley’s Q4 Performance

Investment Banking (IB) Fees: In the fourth quarter, industry-wide IB business witnessed a solid trend reversal, and Morgan Stanley performed extremely well. The company’s total IB fees (in the Institutional Securities division) soared 26.6% from the prior-year quarter to $1.79 billion. Specifically, equity underwriting fees jumped 102.2% and debt underwriting fees were up 4.1%. Further, advisory fees surged 47.1%. A similar trend was witnessed by Morgan Stanley’s close peers – Goldman Sachs GS and JPMorgan JPM.

MS is optimistic about the performance of the IB business this year on healthy and diversified merger and acquisition (M&A) pipelines. On the fourth-quarter conference call, CEO Ted Pick said, “Depending on how you measure it, whether volume or unit, number of units or sort of add value, you see pipelines in the M&A product that are the highest in seven years.”

Trading Revenues: As trading volume and market volatility rose during the fourth quarter, MS benefited from it. The company’s equity trading revenues soared 51% year over year to $3.33 billion and fixed-income trading income grew 34.7% to $2 billion. Likewise, GS and JPM recorded robust performance in their trading business.

Though the trading business will likely normalize over time, MS is expected to keep performing well, given its scale and size and the current ambiguity related to the impact of potential new administrative policy decisions.

Morgan Stanley Under Trump 2.0

On Jan. 20, Donald Trump took the oath of office as the 47th President of the United States. Following his decisive victory in the early November 2024 elections, he has been vocal about several key issues, including tariffs on Mexico and Canada, tax cuts, deregulations and the ‘America First’ vision. The impending changes in administrative policies under Trump 2.0 will unmistakably have direct and indirect effects on Morgan Stanley's operations.

The new administration will likely be adopting a more lenient approach toward deal-making, signaling the end of an era marked by prolonged regulatory scrutiny. This, along with a favorable interest rate environment, strong economic growth and a solid deal pipeline, set the stage for a revitalized IB business this year. Against this backdrop, MS is well-poised to remain at the forefront as capital markets activity experiences a notable resurgence.

On Yahoo Finance's Opening Bid podcast at the World Economic Forum on Jan. 24, Pick noted, “I think the regulatory regime is going to be balanced. I don't think there's going to be some kind of unfettered unleashing of anticompetitive dynamics of company A and company B suddenly owning a market space.” He further added, “I think net-net, of course, the deregulatory wave is going to be beneficial to energy companies, financial companies, and retailers, so I think there will be some M&A activity.”

This will likely lead to a strong IB performance for banks, including Morgan Stanley.

Is Now the Perfect Opportunity to Buy Morgan Stanley Shares?

Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction. These moves have bolstered its diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ aggregate contribution to net revenues jumped to more than 55% in 2024 from 26% in 2010.

Last year, Morgan Stanley recorded $82.5 billion of total net flows in the Investment Management division compared with just $7.5 billion in 2023. Hence, assets under management or supervision were $1.6 trillion as of Dec. 31, 2024, rising 14% year over year. Further, the Wealth Management division’s total client assets jumped 21% to $6.2 billion at 2024-end.

In the past year, shares of MS have jumped 57.3%. It is trading above the industry and the Zacks S&P 500 composite also.

One-Year Price Performance