Morgan Stanley stock in focus as Goldman Sachs predicts an M&A boom

Morgan Stanley stock has wavered recently, evem as the Wall Street company published strong financial results. MS was trading at $218, a few points below its all-time high of $232. This consolidation may lead to a strong rebound after a major Goldman Sachs prediction.

Key Goldman Sachs prediction may boost MS stock

Morgan Stanley is benefiting from major trends in the US this year. Mega IPOs are rising, and analysts expect that merger and acquisition (M&A) deals will accelerate in the near term. 

Morgan Stanley was one of the banks that made a windfall from the recent SpaceX IPO. It is estimated that the company made over $100 million in the process.

The bank will likely benefit from more IPOs, including companies like Anthropic and OpenAI. 

Most notably, Goldman Sachs analysts predict that the merger and acquisition boom has more room to run. Announced M&A deals have jumped by 32% this year to $1.2 trillion. The number of announced deals has soared by 12% in then same period. 

In a report, the bank said that this trend will continue, helped by a steady economic growth, healthy CEO confidence, and a favorable regulatory backdrop. The bank added that: 

“Likely M&A targets should benefit from the ongoing surge in M&A activity, which does not appear to be fully priced in their valuations.”

If this is correct, then Morgan Stanley will be one of the top beneficiaries. Dealogic data estimates that it is the third in the M&A industry this year after Goldman and JPMorgan. It has been involved in deals worth over $831 billion. 

The company also ranks third in the equity capital markets (ECM) bookrunning with its deal value rising to $51 billion. It has also become a major player in debt raising industry.

These numbers are confirmed by its recent financial results, which showed that its net revenue jumped by 27% YoY to $21.3 billion. It was a $1 billion increase from the previous quarter. 

Institutional securities revenue rose by 44% to $11 billion, while its wealth and investment management rose by 14% and 6%, respectively. These ones rose to $8.8 billion and $1.6 billion. Notably, the provision for credit losses dropped to just $98 million during the quarter. Ted Pick, the CEO said:

“Differentiated content from our Research teams continues to drive high levels of client engagement. Wealth Management added a record $148 billion in net new assets, with total client assets across Wealth and Investment Management reaching the $10 trillion milestone.”

Morgan Stanley stock needs to overcome the double-top pattern

MS stock chart | Source: TradingView

Technically, however, the MS stock price will need to overcome the double-top pattern at $230, and whose neckline is at $230. Also, the stock needs to overcome the mean reversion risk. Mean reversion is a situation where an asset normally moves to its historical averages. In this case, the stock is much higher than the 200-day moving average of $184. 

Therefore, there is a risk that it will pull back in the near term because of its weak technicals. On the other hand, a move above the key resistance level of $230 will point to more gains, potentially to the key resistance at $250.