Market Overview

Bank Earnings Pair Trade: Morgan Stanley Vs. Goldman Sachs

Share:
Bank Earnings Pair Trade: Morgan Stanley Vs. Goldman Sachs
Related GS
Amplify ETFs CEO Breaks Down The Merits Of Blockchain Investing
Apple, EA, Goldman Sachs, Mastercard: 'Fast Money' Picks For February 2
Berkshire Hathaway 2017 Annual Letter (Seeking Alpha)
Related MS
The Big Bank Q4 Earnings Roundup: Tax Charges Drag Bottom Lines
Mid-Afternoon Market Update: GNC Surges Following Strong Earnings Guidance; Diffusion Pharmaceuticals Shares Slide

Big bank earnings season is once again right around the corner, with Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc (NYSE: GS) set to report on Oct. 17.

For traders looking for a big bank pair trade heading into earnings, Credit Suisse analyst Susan Katze just repositioned her ratings on the two investment banking giants. On Monday, Katze upgraded Morgan Stanley from Neutral to Outperform and raised here price target from $49 to $54. At the same time, Katze downgraded Goldman Sachs from Outperform to Neutral, while raising her price target from $240 to $255.

According to Katze, Morgan Stanley simply has more room for upside remaining after Goldman’s impressive 42.7 percent gain in the past year.

“Sustained share price outperformance relies on above average and improving ROE prospects—recent results were, in aggregate, better than expected, but not quite up to the 10%+ ROE to be expected out of this franchise,” Katze said of Goldman. At the same time, she also wrote that Morgan Stanley and its 11 percent return on equity and best-in-class equities and investment banking businesses have set the table for impressive and relatively stable long-term earnings growth.

Credit Suisse adjusted its “blue sky” price targets for both banks as well. These targets represent a best-case scenario, which would include strong global economic growth, favorable regulatory reform, rising profit margins, increased capital efficiencies and expanding ROEs. Under this scenario, Katze sees Goldman shares as high as $324 and Morgan Stanley stock as high as $71.

For pair traders looking for additional bank earnings ideas, Credit Suisse maintains Outperform ratings on Bank of America Corp (NYSE: BAC), Citigroup Inc (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM) as well. The firm has a Neutral rating on Wells Fargo & Co (NYSE: WFC).

Related Link: Why JPMorgan, PNC Won't Be Good Buys This Coming Earnings Season

Latest Ratings for GS

DateFirmActionFromTo
Feb 2018Morgan StanleyMaintainsOverweightOverweight
Jan 2018Wells FargoMaintainsOutperformOutperform
Dec 2017Vertical GroupUpgradesHoldBuy

View More Analyst Ratings for GS
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings Long Ideas News Guidance Upgrades Downgrades Price Target Best of Benzinga

 

Related Articles (BAC + C)

View Comments and Join the Discussion!