Morgan Stanley (NYSE: MS) emerges from the fourth quarter with a tale of resilience and challenges. Its share price dipped 4% post-earnings, as the results reflected weakness on the bottom-line.
The financial titan reported revenue of $12.90 billion, slightly surpassing expectations, with a 1% year-over-year growth. A notable contributor to this uptick was a 5% surge in investment banking revenue, driven by a remarkable 25% boost in fixed-income underwriting revenue, riding the wave of increased investment-grade issuances. However, the bank’s net income of $1.52 billion ($0.85 per share) marked a 32% decline from the previous year, primarily due to two one-time regulatory charges totalling half a billion dollars.
Amid regulatory headwinds, Morgan Stanley maintains a robust position, boasting a Standardized Common Equity Tier 1 capital ratio of 15.2%. This surpasses the minimum set by the Federal Reserve by a substantial 230 basis points as of October 1, 2023. While the CEO sees promising prospects in growing M&A pipelines and share offerings, caution arises from potential downside risks tied to geopolitical conflicts and the state of the U.S. economy, which could sway asset prices and investment activities.
Technical
Morgan Stanley faces a shifting landscape as its share price encounters headwinds post-earnings, stirring a potential change in sentiment. The blue block, representing a gap down in the share price, signals a departure from recent upsurges.
After establishing support at $69.42 per share, a swift rebound from oversold RSI conditions propelled the price above the 100-day moving average and key Fibonacci Retracement levels. However, the journey hit a roadblock at $94.01 per share, a critical supply zone stemming from a July 2023 selloff, coinciding with a 100% retracement and overbought RSI.
The subsequent downturn, just preceding the earnings release, suggests a struggle between supply and demand dynamics. A breach below the 100-day moving average could amplify downside pressures, potentially converging at the 50% retracement level. In contrast, the $94.01 per share level could again serve as a point of interest to the upside if momentum sways in favour of bullish traders, highlighting the delicate balance between buyers and sellers.
Summary
Morgan Stanley confronts a 4% share price dip post-earnings, reflecting a subdued bottom line despite robust revenues. Challenges emerge as regulatory charges impact net income, yet the bank maintains strength with a 15.2% Common Equity Tier 1 capital ratio. Technical struggles around $94.01 highlight a surge in selling pressures. If downside pressures persist, the 50% Fibonacci Retracement level could serve as a point of interest to the downside.
Sources: Morgan Stanley, CNBC, Reuters, TradingView
Piece Written by Nkosilathi Dube, Trive Financial Market Analyst
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