Why Morgan Stanley Offers A Compelling Long-Term Investor Story

Morgan Stanley (NYSE:MS) on Wednesday reported a second-quarter 2025 earnings of $2.13, up from $1.82 a year ago and beating the consensus of $2.02.

Net earnings increased to $3.54 billion from $3.08 billion. The U.S. bank reported revenue of $16.79 billion, up 12% year over year, beating the consensus of $16.11 billion.

Despite the positive headline figures, Morgan Stanley’s stock reacted negatively after the earnings release, according to Bank of America (BofA) Securities.

Also Read: JPMorgan’s Q2 Outperformance Bolsters Confidence In Its 2025 Outlook

Morgan Stanley’s provision for credit losses jumped to $196 million, primarily due to growth in the corporate loan portfolio and secured lending facilities, and the impact of a moderately weaker macroeconomic outlook.

BofA noted that while Morgan Stanley’s markets and wealth management divisions had a strong quarter, the stock likely faced pressure due to already high expectations following robust year-to-date gains. Furthermore, its investment banking performance fell short compared to rival JPMorgan (NYSE:JPM).

Meanwhile, JPMorgan, a banking behemoth, reported adjusted earnings per share (EPS) of $4.96, outperforming consensus estimates of $4.48. Its managed net revenue decreased 10% year-over-year to $45.68 billion, and reported net revenue declined 11% to $44.91 billion, though still topping the $44.17 billion consensus estimate.

Looking ahead, analyst Ebrahim Poonawala of BofA revised Morgan Stanley’s fiscal year 2025/2026 EPS estimates upward to $8.82/$9.52 from $8.58/$9.25, assuming investment banking revenues remain relatively flat year-over-year for fiscal 2025.

BofA also highlighted Morgan Stanley’s openness to pursue mergers and acquisitions (M&A), despite emphasizing a “super high” bar for such deals. Poonawala acknowledged that M&A potential might have influenced the weak stock reaction but stressed Morgan Stanley’s strong track record in deal-making.

BofA maintains a Buy rating on Morgan Stanley, with a price forecast of $154, considering the stock attractively valued at 15 times its estimated 2026 earnings. This valuation is lower than the typical 15-20 times earnings for wealth managers and 20 times for online broker Schwab, suggesting a favorable risk-reward balance for long-term investors in the wealth management sector.

Goldman Sachs noted that Morgan Stanley leaders expressed optimism about the future of primary investment banking, anticipating strong activity from June to continue into the second half of 2025 as corporate teams adapt to the uncertain economic environment. Morgan Stanley’s solid deal pipeline supports this positive outlook.

Based on the latest earnings and management commentary, Goldman Sachs on Wednesday adjusted Morgan Stanley’s EPS estimates for 2025, 2026, and 2027 by +1%, -1%, and -1%, respectively. Analyst Richard Ramsden maintained a 2026 price-to-earnings (P/E) target of 14.5x, leading to a slightly reduced price forecast of $146 from $147, while reiterating a Neutral rating.

Price Action: MS stock is trading higher by 0.74% to $140.83 at last check Thursday.

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