Top analyst drops bold call on Morgan Stanley after blowout earnings
Morgan Stanley did everything right to justify a big bank at record highs. The bank achieved impressive earnings, experienced significant growth in wealth management, and implemented a strategy that was more effective than just hype.
It's no surprise that Bank of America analysts reiterated a buy rating and raised its price objective to $220, with the stock changing hands at $191.23 when the report dropped.
"The blueprint is in place," the analysts noted.
Morgan Stanley management does not have to promise the moon. Instead, the path to higher profitability looks largely within reach.
Morgan Stanley's quarter hits all the right beats
Morgan Stanley shares hit a fresh all-time high following “solid” 4Q25 results, a big achievement for a legacy player.
The most important metric is the core EPS, which was $2.73, beating Bank of America's expectation of $2.32 and the average estimate of $2.44. Morgan Stanley said it was about 12% more than anticipated.
Bank of America believes wealth management is the most important nugget for the company. Analysts were especially interested in the kinds of inflows that might modify the slope of future profits.
Wealth Management was the tell: $122 billion in net new assets, margin jumps
Now, let's get into the weeds. Bank of America, in its note, is full of praise for Morgan Stanley’s Wealth Management, and it's perhaps the biggest driver of that confidence.
- Net new assets: $122 billion in the quarter, versus $57 billion a year ago
- Pre-tax margin: 31%, up 400 basis points (4 percentage points)
The bank's conclusion is that management struck a careful balance. It didn't boost long-term financial goals, but it did confirm that the franchise is in a favorable position to make more money.
Bank of America also flagged CEO Ted Pick’s tone on execution, quoting him on the earnings call: “Our expectation going forward is that if this environment is welcoming, we are meant to execute at or above these firmwide goals, as we did in 2025.”
Morgan Stanley strategy is “hard-to-replicate,” with optionality via E*TRADE
Bank of America's optimistic view is based on what it deems Morgan Stanley's best-in-class and hard-to-copy combination.
- A platform for financial markets throughout the world
- A leading U.S. company that manages wealth
- Owner of E*TRADE, which it calls "significant optionality," since it offers access to a younger audience and topics such as crypto, tokenization, and global development
The company also says there are still chances to turn assets into advising assets, boost efficiency using AI, and improve "capital flex."
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Bank of America believes the combination might help ROTCE reach the mid-20s, which is higher than management's 20% aim.
This would depend on how much money is spent on investments, how capital is used, and the overall revenue situation.
Bank of America hikes 2026 and 2027 EPS forecasts
Higher earnings estimates drive the price target increase.
Bank of America revised its EPS forecasts.
- FY26 EPS, up to $11.45 from $10.95
- FY27 EPS, up to $12.35 from $12.18.
The company also said deposit growth was greater than projected (+2.5% vs. 2.0%). Still, management thinks wealth management net interest income will remain the same in 1Q26, with bigger balances offsetting lower rates before improving later in the year.
Bank of America stated it is cautiously predicting the following on the markets side.
- Investment banking revenues up 14% year over year in FY26
- Revenues from trade up 2% year over year
Morgan Stanley valuation isn’t cheap, but BofA sees revision risk skewed higher
Bank of America knows the stock is already priced in with optimism, but analysts still think the risk/reward ratio is good, given the strong chances of further favorable EPS revisions.
The note also predicted the following for Morgan Stanley.
- 16.7 times the EPS for FY26
- 15.5 times FY27 EPS
- 3.5 times the tangible book value by the end of 2026
In short, Bank of America isn't calling Morgan Stanley "undervalued" in the usual sense.
Instead, it's saying that the strength of the brand and execution make it more likely that projections will keep climbing, which is what may sustain a premium multiple.
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