Morgan Stanley (MS) reported better-than-expected third-quarter results Wednesday, even as investor disappointment over its wealth management business and the prolonged slump in investment banking weighed heavily on shares — prompting us to lower our price target on the Club holding. While it’s fair to see the stock trade down on the earnings report, the punishment looks too aggressive ahead of what should be a much better 2024 for the investment-banking industry. And that’s why we bought shares into weakness Wednesday. Revenue for the three months ended Sept. 30 increased 2% year-over-year, to $13.27 billion, outpacing analysts’ expectations of $13.23 billion, according to estimates compiled by LSEG. Earnings-per-share (EPS) fell 6% on an annual basis, to $1.38, exceeding the $1.28-per-share estimate forecasted by analysts, LSEG data showed. Bottom line Morgan Stanley shares plummeted by 6.6% Wednesday, to hit a new 52-week low of roughly $75 apiece. The headline figures came in better than Wall Street expected, but the bank reported weak results at its investment-banking and wealth-management units. A softer performance in investment banking was not a surprise, given the current dearth of mergers and acquisitions and a still-frozen market for initial public offerings. But investors were clearly taken aback by shortcomings in wealth management, which had become the bank’s most reliable segment. Wealth management revenues increased about 5% on an annual basis, but fell short of analysts’ forecasts. Net interest income also came up short, as clients allocated more of their dollars to higher-yielding cash alternatives. More broadly, Wall Street was concerned over the bank’s poor showing for net new assets, which came in at just $36 billion in the third quarter. In the first half of 2023, Morgan Stanley grew its assets by roughly $200 billion, in line with its target of adding $1 trillion in net new assets every three years — a goal we think is still…
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