To The Moon

$Morgan Stanley(MS)$ is expected to release its quarterly earnings result for fiscal Q1 2025 on 11 April 2025 before the market open.

Market is expecting higher revenue from MS, as revenues are expected to be $16.55 billion, up 9.4% from same quarter one year ago.

The quarterly earnings per share is expected to come in at $2.22 per share in its upcoming report, which represents +9.9% from same period last year.

Morgan Stanley (MS) Last Positive Earnings Call Saw Share Price Drop By 22.65%

MS last positive earnings call on 16 Jan 2025 saw its share price decline by 22.65%.

Morgan Stanley demonstrated strong financial performance with record earnings and revenues, driven by robust growth in Institutional Securities and Wealth Management. The firm showed resilience and strategic focus, expanding its fee-based flows and achieving significant growth in its Investment Management AUM. However, there were challenges related to real estate charges, loan growth, and compliance investments. The overall sentiment of the call is positive, with optimism about future growth opportunities despite some challenges.

Morgan Stanley (MS) Guidance On AUM Growth

During Morgan Stanley's Q4 2024 earnings call, significant guidance was provided regarding the firm's strategic direction and financial performance. Ted Pick, Chairman and CEO, highlighted the firm's robust revenue across the four quarters of 2024, with figures of $15.1 billion, $15.0 billion, $15.4 billion, and $16.2 billion, leading to a record earnings per share (EPS) of $2.22 in Q4, the highest in over 15 years. For the full year, the firm achieved a return on tangible equity (ROTCE) of 19% and an EPS of $7.95, showcasing its resilience amidst macroeconomic uncertainties. The strategic update introduced Morgan Stanley's "four pillars"—strategy, culture, financial strength, and growth—emphasizing a focus on serving clients, maintaining strong capital and liquidity, and making strategic investments.

Additionally, the firm reported that Wealth and Investment Management combined revenues grew to $34 billion, with total client assets nearing $7.9 trillion. The investment management division reached a peak AUM of $1.7 trillion, bolstered by significant inflows and market gains.

Key Factors Influencing Morgan Stanley (MS) Q1 2025 Earnings

Morgan Stanley reported fourth quarter revenues of $16.2 billion and full-year revenues of $61.8 billion. The fourth quarter earnings per share reached $2.22, the highest in over 15 years, contributing to a full-year EPS of $7.95.

Investment Banking & Capital Markets

M&A and IPO Activity: A rebound in global M&A, IPOs, and debt underwriting (driven by improved market sentiment, lower interest rates, or corporate confidence) could significantly boost fees.

Institutional Securities delivered annual revenues of $28.1 billion, with growth across regions and products. The segment achieved its highest reported equity revenues and combined equity and fixed income markets results.

Trading Revenue: Equity and fixed-income trading performance will hinge on market volatility (e.g., geopolitical tensions, election cycles, or Fed policy shifts).

Wealth & Asset Management

AUM Growth: Market appreciation and net inflows into Morgan Stanley’s wealth management division (a key profit driver) will depend on equity/bond market performance and client retention.

Wealth Management reported record revenues of $28.4 billion for the year, with pretax profit of $7.7 billion. The segment saw net new assets of $252 billion, representing approximately 5% annual growth.

Net Interest Income (NII): Wealth management loans (e.g., margin lending, mortgages) could benefit if interest rates remain elevated, though rate cuts by 2025 might pressure NII.

The Investment Management business reported annual revenues of $5.9 billion and reached a new AUM peak of $1.7 trillion, supported by market gains and net inflows.

Expense Management

Compensation costs (a major expense for investment banks) could rise if dealmaking/trading revenue surges. Fee-based flows in Wealth Management reached an exceptional $123 billion in 2024, indicating strong momentum and client engagement.

Efficiency gains from tech investments (e.g., digital wealth platforms) might offset inflationary pressures.

Macro Environment

Equity Market Health: Strong stock markets lift asset management fees and retail investor activity.

There were challenges in loan growth earlier in the year due to the interest rate environment, with a decline in the pace of pay downs affecting the securities-based lending product.

Global Growth: A soft landing or recession in key regions (U.S., Europe, Asia) will impact corporate dealmaking and wealth client behavior.

In 2024, Morgan Stanley took real estate charges of $62 million, impacting full-year EPS by $0.03.

Regulatory & Competitive Risks

Stricter capital rules or compliance costs (e.g., Basel III Endgame) could constrain returns. Investments in systems for AML and BSA compliance on the Wealth Management side were necessary to meet higher regulatory standards, indicating ongoing challenges in this area.

Competition from fintechs and private equity in wealth management and advisory services.

Morgan Stanley (MS) Price Target

Based on 15 Wall Street analysts offering 12 month price targets for Morgan Stanley in the last 3 months. The average price target is $139.33 with a high forecast of $156.00 and a low forecast of $125.00. The average price target represents a 38.90% change from the last price of $100.31.

Based on how the market have been experiencing selloff due to the tariffs turbulence, which is going to cause a recession as we have seen $JPMorgan Chase(JPM)$ giving the probability of it happening at 80%.

In order to look at MS for the long term, we will need to look at its strength, which Morgan Stanley is a leading global wealth management franchise (~$5 trillion in client assets).

With its diversified revenue streams (less reliant on net interest income than commercial banks). But we need to consider some important risks which could derail MS share price which is MS could be having overexposure to capital markets cyclicality.

Now that tariffs is causing market meltdown, we might want to see more rate cuts, but Morgan Stanley margin pressure might occurred if rate cuts accelerate.

Technical Analysis - Exponential Moving Average (EMA)

We are now facing unstable equity markets due to the turbulence caused by the huge U.S. tariffs which is set to implement on 09 April. This will also cause the M&A recovery drive to suffer, hence MS might be seeing mid-single-digit revenue growth in a distance.

Wealth management AUM grows 5–7% YoY might not happen, and we will need to see equity rally and surge in IPOs/M&A (e.g., tech, energy transition deals) boost investment banking fees by 15–20%.

This might not happen with the current market condition, and wealth management inflows might not exceed expectations, driven by high-net-worth client growth.

Market correction or recession might slashes AUM and trading revenue. Investment banking fees drop as deals stall; credit losses rise in wealth lending.

From the technical, MS is already near the lows recorded in Sep 2024, so if it dip further, we might see weakness in the entire financial sector, which could cause the guidance to come in negative for 2025.

I think there might be some downside on MS share price once earnings come in.

Summary

Morgan Stanley’s Q1 2025 earnings will likely reflect its sensitivity to capital markets activity and equity market performance. Its wealth management division provides stability, but investment banking remains a swing factor.

If macroeconomic conditions stabilize and corporate deal-making rebounds, MS could outperform peers. However, a recession or market downturn would disproportionately impact its revenue mix.

Investment banking fees vs. wealth management fees (aim for balanced growth). Trading revenue stability (historically volatile). Costs as a percentage of revenue (target: below 70%).

Growth in wealth/asset management (a high-margin business). I think MS might take a bigger hit on its AUM growth as market is anticipating a recession soon.

Appreciate if you could share your thoughts in the comment section whether you think MS could withstand the impact of recession fears and a possible recession hit.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.