Morgan Stanley Is A Hard-To-Replicate Franchise, Says Analyst

Morgan Stanley (NYSE:MS) stock is trading relatively flat on Friday. On Thursday, the company reported a fourth-quarter 2025 earnings of $2.68, up from $2.22 a year ago and beating the consensus of $2.41. Net earnings increased 18% year over year to $4.397 billion. Bank of America Securities analyst Ebrahim H. Poonawala reiterated the Buy rating and raised the price forecast from $210 to $220. The stock hit a record high after fourth-quarter fiscal 2025 core earnings reached $2.73, analyst Poonawala noted. That result exceeded Bank of America's $2.32 forecast and the $2.44 consensus estimate, the analyst noted. Poonawala said Wealth Management momentum drove investor confidence during the quarter. The segment generated $122 billion in net new assets, compared with $57 billion a year earlier. Pre-tax margins climbed to 31%, marking a 400-basis-point improvement, according to the analyst. Management avoided raising long-term targets while signaling stronger profitability potential, Poonawala said. CEO Ted Pick said favorable conditions could allow results to meet or exceed firmwide goals. Poonawala said management struck a balance between discipline and confidence during the earnings call. The analyst said Morgan Stanley remains difficult to replicate due to its integrated business model. That model combines global capital markets, U.S. wealth management, and the E*TRADE platform. Poonawala said E*TRADE adds optionality through younger clients, crypto exposure, and tokenization opportunities. Management continues focusing on franchise synergies and advisory asset conversion, the analyst noted. AI-driven productivity gains also support margin expansion, according to Poonawala. Those initiatives could lift returns on tangible equity into the mid-20% range. Management currently targets roughly 20% returns, the analyst said. Poonawala said timing depends on investment spending, capital deployment, and revenue growth conditions. He raised fiscal 2026 earnings estimates by 4.5% to $11.45. Return on tangible common equity is forecast at 21.9%, Poonawala said. The analyst lifted fiscal 2027 earnings estimates to $12.35. Higher revenue expectations drove the earnings revisions, according to Poonawala. Deposit growth exceeded expectations, rising 2.5% versus a projected 2.0%. Management expects wealth management net interest income to remain flat early in fiscal 2026. Higher balances should offset rate cuts before income trends higher later in the year. Poonawala projects investment banking revenue growth of 14% in fiscal 2026. Trading revenue is forecast to rise 2% year over year. Despite an elevated valuation, the analyst sees upside risk to earnings estimates. MS Price Action: Morgan Stanley shares were up 0.54% at $192.26 at the time of publication on Friday. The stock is trading at a new 52-week high, according to Benzinga Pro data. Photo by Taljat David via Shutterstock