We're Raising Our Price Targets on Two Portfolio Stocks
Should two high-flying positions continue to rise, we may have to consider some prudent trimming.
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Following back-to-back earnings reports from Bank of America BAC and Morgan Stanley MS that bested consensus expectations, we are lifting our price targets on both positions.
Our revised BAC price target is $51, up from $49, which keeps our One rating intact. Meanwhile, as we lift our MS target to $130 from $120 because we see low double-digit upside from the current share price, we are downgrading MS shares to a Two rating following their near 28% gain since early August.
Our upward revisions to price targets on BAC and MS reflect the continued positive outlook for investment banking activity and further gains in wealth/asset management as the Fed moves further when it comes to rate cuts. As the pace of those additional cuts becomes clear, we’ll revisit net interest income expectations for both banks as it relates to the current quarter and 2025. The greater exposure at Morgan Stanley to investment banking and asset/wealth management is the reason behind our larger price target revision compared to that at Bank of America.
Potential Prudent Trimming in MS and Another Position
This morning Morgan Stanley reported far better than consensus earnings per share estimates, while its top line rose 15.9% year over year to $15.38 billion, handily beating the $14.35 billion consensus. Fees from investment banking jumped 56% year over year to $1.4 billion, which along with the strong showing for trading volume pushed the firm’s net profit up 32% year over year. Fixed income and equities trading revenue surged 13% to $5 billion, driven largely by equities.
All that confirms our thought process behind Morgan Stanley and it’s also leading the shares nicely higher Wednesday morning, adding to the gains we mentioned above. We’ll see where MS shares settle today but following the aggregate move higher, should the portfolio’s MS position size cross 4.5%, some prudent portfolio management may be in order. The same goes for our position in Marvell Technology MRVL, which closed Tuesday night at 4.43% of portfolio assets following the positive Alert we shared with you yesterday.
At the time of publication, TheStreet Pro Portfolio was long MS, BAC and MRVL.
