Magazine article American Banker

Morgan Stanley Falls 5% as Analyst Cuts Its Rating

Magazine article American Banker

Morgan Stanley Falls 5% as Analyst Cuts Its Rating

Article excerpt

Shares of Morgan Stanley Dean Witter fell for a third consecutive session Wednesday, shedding 4.65% as analyst Amy S. Butte of Bear, Stearns & Co. downgraded the stock to "neutral" from "attractive."

Ms. Butte announced last week that she would review the ratings of all the investment banks she covers but on Wednesday reiterated her "buy" rating for Lehman Brothers Holdings Inc. and her "attractive" rating for Goldman Sachs Group Inc. Her ratings for Merrill Lynch & Co. remained at "attractive," for Legg Mason Inc. at "buy," and for Friedman Billings Ramsey Group at "neutral."

Morgan Stanley's shares had fallen to $76.625 by Tuesday from their all-time high of $109.375 on Sept. 11. Even so, Ms. Butte wrote in her research note that she was downgrading the company because of its market valuation, an indication that she still considers it not cheap enough to buy. On Wednesday, Morgan Stanley closed at $73.0625, down $3.5625.

Other analysts remained somewhat more bullish; Morgan Stanley scored 1.9 out of a possible 5 on the First Call/Thomson Financial buy-to-sell scale, holding several medium ratings, two "strong buys," and four "buys."

Ms. Butte said in her research note that she expects Morgan Stanley to achieve a 25% return on equity next year, as well as earnings of $4.80 per share, the highest for the brokerages she covers. But she wrote that those earnings would be "a material decline from consensus assumptions of 30% (ROE and earnings of) $5. …

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