Morgan Stanley (MS) Trade of the Week
Morgan Stanley (MS) shares set to emerge out of a narrow range and back to new highs above $85 with MACD and RSI ready to run. MS has been in a strong trend and punching back above the 8- and 21-MA on Friday as well as VWAP from the prior highs. A breakout targets $95 and then $100. Options flow has been bullish too with buyers recently in the June $85 calls, July $80 and $90 calls in size, and the May $85 calls.
The $146.5B company trades 11.7X earnings, 2.6X sales, and 1.55X book. MS is coming off of a strong quarter driven by their wealth management business and investment management. Their 2020 deal for E-Trade is helping bring in a record number of new asset inflows and more client-facing assets are being put into fee-based solutions. Elsewhere, their recent deal for Eaton Vance is helping drive AUM in their IM business to over $1.4T. In 2021, the firm should continue to see outperformance due to a strong balance sheet, synergies from the two deals, positive asset flows, and strong markets. Analysts have an average target for shares of $73.50 and a Street High $98. Berenberg upgrading to Buy last week as a growing proportion of its earnings are generated from wealth and investment management, its investment bank has consistently taken market share over the last few years, and its capital return is likely to exceed consensus expectations given the company’s strong capital buffer. Short interest is 0.66%. Hedge fund ownership rose 15.5% in Q4.
Trade to Consider: Long the MS July $85 Calls for $2.60 or Better