As mentioned earlier, Morgan Stanley (MS) received upgrades today from both Credit Suisse and from UBS Securities.
UBS’s Glenn Schorr writes that if areas outside investment banking, which has been strong, can improve over the next 12 months, the stock is a “Buy” at $37, versus his prior “Neutral” rating on the shares. With a new CEO and a new CFO taking over this quarter, there’s work to be done “retooling” the asset management business, rebuilding the “footprint” of fixed income, commodities and credit division, etc., etc. But at $37, the stock would be 1.2 times his projected book value, and that’s a good price for such a fixer-upper, he thinks.
Much the same argument is made by Credit Suisse’s Howard Chen in raising the stock to “Outperform” from “Neutral.” The company’s previous spending on its institutional securities franchise and the integration of its global wealth management business should bring $3.50 per share in earnings this year or more. And investors fail to appreciate numerous ways book value can be increased this year, including the sale of Van Kampen, which should be done by the middle of this year.
His $38 price target is based on 1.2 times book value, same as Schorr’s target.
Note that Chen also cut his earnings estimates on Goldman Sachs (GS), as I noted earlier.
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