Principal Financial Group (PFG) has a more attractive valuation and fewer downside risks clouding its business outlook. Morgan Stanley said Thursday in a report.

The investment bank upgraded the financial services company's stock to equal weight from underweight and raised its price target to $81 from $80.

When the stock was downgraded in December 2024, it was trading at about 10.1 times its projected earnings, roughly in line with historical norms, the report said. Today, the stock trades closer to 8.7 times earnings, a level Morgan Stanley said better reflects ongoing challenges in Principal's retirement and investment segments.

A stronger equity market may help lift customer account values, which would support fee-based revenue, a key driver of Principal's earnings, accounting for 70% of its total, the report said.

Still, Morgan Stanley cautioned that risks remain, including a potential market downturn that could pressure fee income, margin compression in the retirement segment, and continued volatility in the life insurance business.

Price: 79.21, Change: +0.07, Percent Change: +0.09