What We’re Watching for as Two Financial Holdings Reach Our Price Targets

When it comes to our positions in Morgan Stanley MS and Bank of America BAC, there has been a bit of excitement in the market following the 2024 election and the potential for a more friendly business and deal environment.

That enthusiasm has pushed BAC shares closer to our price target while MS shares have been sitting on top of our price target even after locking in some gains on both earlier this month. Two areas we are watching when it comes to the investment banking business at both companies are IPO filings and M&A deal flow. The expectation is that both of those investment banking fee drivers will be better in 2025 resulting in higher profits and EPS. That has us watching the post-election activity for both as we revisit our MS and BAC price targets. While we’re not going to make any revisions today, what we are seeing suggests we, and the rest of Wall Street, may be doing just that in the next few months.

The IPO Market

The U.S. IPO market during the first nine months of 2024 has outpaced all of the activity in 2023 and data from EY shows more than 18 deals have raised more than $500 million, more than double the total for all of 2023. That suggests investor appetite has returned for well-positioned companies and well-priced offerings, and that is fueling IPO readiness efforts. BMO Capital Markets sees U.S. IPO proceeds between $40 billion to $50 billion in 2025, an increase of at least 32% compared to this year. Here are some of the more notable IPO candidates we may see in the coming weeks and months:

As we’ve discussed, buy-now-pay-later firm Klarna recently submitted a confidential draft registration for a proposed IPO with the SEC
Autonomous vehicle technology company Pony AI (PONY) is looking to raise $240 million as soon as this week
Cloud-based software platform company ServiceTitan is said to have filed for a $750 million IPO and is expected to list before the end of the year
Canadian pharma company Apotex, which was taken private in 2023 by SK Capital Partners with an estimated value between $2.2 billion and $2.9 billion, is reportedly eyeing an IPO in 2025
NielsenIQ, backed by Advent International and KKR & Co. KKR is evaluating an IPO that could value the consumer intelligence company at about $10 billion
Medline Industries, a leading provider of medical supplies with estimated revenue of around $23 billion, is reportedly looking to raise over $5 billion through an IPO next year. In 2021, Medline was sold by the Mills family's Blackstone BX, The Carlyle Group CG and Hellman & Friedman for $34 billion
Reports suggest Nvidia NVDA backed CoreWeave, which specializes in cloud-based graphic processing unit infrastructure, is targeting to raise more than $3 billion in an IPO potentially during Q2 2025.

Other companies that are expected to tap the IPO market include Panera Bread, Stripe, Chime Financial, Revolut and Navan.

Let’s keep in mind that IPO filings are one thing, but that bringing a deal to market and pricing is something else. While filings can be interesting, and yes we do tend to learn quite a bit in reading S-1 filings with the SEC, we’ll remain focused on deals that get priced and which firms are the lead underwriters.

As we watch that activity, we’ll also keep our eyes peeled for M&A activity across private equity sponsors and corporate transactions. Our thinking continues to be deal activity should pick up as the Fed continues to move monetary policy from restrictive to neutral over the coming quarters.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long MS, BAC and NVDA.