As the US earnings report cards filter through, it is clear that not all investment banks are created equal, as with Morgan Stanley, whose main line of business was under threat for the majority of 2022. The investment bank faced higher inflation, interest rates, and a turbulent market environment, and the appetite for dealmaking and risky investments dropped in 2022.
According to Dealogic, revenues in the investment banking industry fell $15.3B in the fourth quarter, down 50% from the prior year’s fourth quarter. Part of this drop in revenue can be attributed to Morgan Stanley’s topline. On the other hand, higher interest rates came to sweep Morgan Stanley’s share price off the floor of $72.00, taking it up significantly higher by 18% to $85.16 at yearend. Risk-off sentiment dominated most of 2022 as risk assets experienced a sharp drop (S&P500 sinking 19% for the year), which will likely continue into 2023.
Earnings and revenues beat expectations by 4.72% and 1.66%, respectively. The results pushed prices to the resistance level of $95.00 in pre-market trade. Although earnings beat estimates, Revenues of $12,7B remain 13% off 2021’s results.
Technicals
The price action on Morgan Stanley gapped significantly higher, above the $95.00 level at the market opening after a better-than-expected earnings performance. The $95.00 level will be watched closely as it could be the next support level of interest for the price to increase or see a significant drop in value.
For the bulls, a retest of $95.00 could support higher prices back to the highs of $109.00 formed in February 2022. Short-term bearish traders will look for lower levels if the $95.00 support level does not hold, and the $88.44 and $84.00 are the following interest levels, respectively.
Summary
The critical level to monitor for potential long positions could be the $95.00 support level which, supported by volume and fundamentals, could see a fair value estimate at $109.00. For the bears, a move below substantial volume could lead to lower levels around $88.44 and $84.00. lower chance of a move towards the USD 109.00 level.
Sources: Koyfin, TradingView.
Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.
