Analyst Note| Michael Wong, CFA, CPA |
We are increasing our fair value estimate for narrow-moat Morgan Stanley to $56 per share from $49. This implies a forward price/earnings ratio of 11 times and a price/tangible book ratio of 1.3 times. Of the net $7 increase in our fair value estimate, $1.50 was a result of earnings since our previous valuation update. The remaining $5.50 increase is primarily from the strong recovery in client assets over the previous several months and projecting that earnings will hold up better in this recession than in our prior forecast. We assess that shares are currently fairly valued to modestly undervalued.