To The Moon

$Morgan Stanley(MS)$ is expected to report its third-quarter earnings on Wednesday (16 Oct) before the market open. Market is expecting the bank to report higher profit from a year ago as they are building the strong investment-banking results from competitors.

Investors will watch to see whether Morgan Stanley will report similarly robust earnings from that business and its wealth management unit, which manages some $5.7 trillion of client assets.

Morgan Stanley has in recent years diversified the way it makes money, away from what can be feast-or-famine periods for investment bankers and toward the often steady, sticky industry of managing money for wealthy people. The wealth business was Morgan Stanley's largest revenue driver in 2023.

Goldman Sachs reported on Tuesday that profit rose 45% from the prior year as revenue from debt and equity underwriting activity increased significantly. JPMorgan Chase said last week that investment banking fees rose 30% from a year ago.

Earnings per share is expected to come in at $1.59.

Post Earnings Options Move Expected At 3.8% Either way

The options market overestimated MS stocks earnings move 58% of the time in the last 12 quarters.The predicted move after earnings announcement was ±3.8% on average vs an average of the actual earnings moves of 3.2% (in absolute terms).

Technical Indicators Suggest Uptrend

As MS’s competitors have shown pretty significant earnings from the investment fees and also earnings from debts, we might be seeing similar behavior in MS earnings.

Hence, traders and investors should be able to ride on the strength of the financial sector to look forward to MS better earnings and stock price upside.

Implied Volatility Skew Suggest Slightly Bearish

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. I

The implied volatility for downside puts is increasing relative to upside calls, this suggests the market is pricing in a larger fear to a downside move.

And the skew indicator is signalling a slightly bearish move, so we might see a not so positive outlook guidance and that might cause a small dip.

Summary

While MS might enjoy the same upside move as the other investment bank which has reported their earnings, we might see that MS would give a more cautious outlook guidance as the rate cut might start to show impact on their investment banking business in the fourth quarter.

Appreciate if you could share your thoughts in the comment section whether you think MS would be able to post a better-than-expected earnings.

@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.