Morgan Stanley: Raising Our Fair Value Estimate and Upgrading Economic Moat After Fresh Look

Key Morningstar Metrics for Morgan Stanley

• Fair Value Estimate: $127.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

We’re transferring coverage of Morgan Stanley MS, a diversified financial services company and global systematically important investment bank, to a new analyst.

The bottom line: We’re raising our fair value estimate to $127 per share from $101 after raising our economic moat rating for the firm to wide from narrow and raising our revenue growth and operating profit forecasts.

• In our view, Morgan Stanley boasts the strongest wirehouse wealth management business, with $7.7 trillion in client assets at the end of the first quarter of 2025, 99% retention among clients with more than $1 million in assets, and roughly double the industry average assets per advisor ($156 million, by our math). Its 6.6% average annual organic inflows over the past decade are best-in-class among wirehouse firms.
• In institutional trading and investment banking, we view Morgan Stanley as one of only a handful of global investment banks that can effectively underwrite and distribute the largest, most lucrative global deals. The firm consistently places in the top three in investment banking league tables and generates mid-teens segment returns on equity.

Big picture: Even after the move, shares trade at roughly a 12% premium to our intrinsic valuation. While we’ve maintained our Exemplary Capital Allocation Rating, we have raised our Uncertainty Rating to High from Medium, consistent with our quantitative methodology and assessment of at least temporarily elevated cash flow uncertainty.

• There’s no doubt that the operating and regulatory environment for banks has improved significantly over the past few quarters, but the industry trades at a 18% cap-weighted premium to our fair value estimates as of July 11.
• We continue to maintain that banks are generally overearning in their trading operations, and we don’t believe that downside risks like trade policy impacts and slowing growth are adequately priced in.