Morgan Stanley (MS Stock) still the best equity trader?

Morgan Stanley is set to report its fourth-quarter 2020 earnings before the market open today. Morgan Stanley is a leading global financial services firm providing investment banking, securities, wealth management and investment management services. Hence similar to the previous three quarters of 2020, the coronavirus pandemic, along with the US presidential election and vaccination breakthroughs clearly impacted the Morgan Stanley report and weighed on markets sentiment especially as in the 4th quarter the second wave of pandemic looks to be even stronger than before. The virus spread created chaos in financial markets that impacted the value of loans, investments and trading assets, and significantly reduced interest income and investment banking fees.

However,  fiscal stimulus programs and ongoing monetary support are expected to have helped  client activity bounce back in H2 of 2020, leading to heightened volatility. Therefore, today we could see something similar to the JPMorgan report. Morgan Stanley’s equity and fixed income markets revenues are expected to have improved. Additional reasons that could support a positive reading today are the near-zero interest rates and the Federal Reserve’s bond purchase program, as these is likely to have aided Morgan Stanley’s debt underwriting fees, which account for more than 50% of their total underwriting fees. Also, global M&As spiked in the 2nd half of 2020 due to restructuring. Hence Morgan Stanley could benefit from advisory fees incomes.

Nevertheless, according to Forbes and Zacks, Morgan Stanley is expected to earn $1.29/share on $11.08 billion in revenue. This would represent year-over-year growth of 7.5%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $11.28 billion, up 3.88% from the year-ago period.

Technical Analysis

It has been an interesting year for US company shares. Morgan Stanley hit a yearly high of $91.31/share in 2020 while currently trading within the $75-77 territory. The share price is on course for the best performing quarter in Morgan Stanley’s history, since it is a breath away from the 161.8 Fibonacci extension from November’s rally. From the technical perspective, the stock’s outlook is currently bullish however some consolidation has been noticed since December 2020 on the overbought performance seen in the 2nd half of 2020. The price is positioned well above the 200 Day Moving Averages and 50 Day Moving Averages.

The stock is prone to big moves after reporting earnings and could easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock could easily gap down.