Morgan Stanley Gains 45.1% in a Year: Should You Buy MS Stock Now?

Shares of Morgan Stanley MS have jumped 45.1% in the past year, outperforming the industry’s 22.9% growth. In the same time frame, the S&P 500 has rallied 21.3%.

Also, the company’s shares have fared better than its close peers like Goldman Sachs GS and Citigroup C. In the past year, Goldman and Citigroup shares have gained 40.7% and 38.6%, respectively.

One-Year Price Performance

Image Source: Zacks Investment Research

Does MS stock have more upside left despite recent strength in price? Let us find out by looking at its fundamentals and growth prospects.

Key Factors Supporting Morgan Stanley

Broadening Revenue Base: Morgan Stanley’s strategy of reducing reliance on capital markets remains a key long-term growth driver, supported by the expansion of Wealth and Investment Management divisions and acquisitions, including Eaton Vance, E*Trade Financial, Shareworks and EquityZen. These businesses have diversified revenues and deepened client relationships across advisor-led, self-directed and workplace channels. Wealth and Investment Management segments’ contribution to total net revenues surged to nearly 54% in 2025 from 26% in 2010.

Wealth Management (WM) client assets and Investment Management (IM) assets under management (AUM) recorded five-year compound annual growth rates (CAGRs) of 13% and 19.4%, respectively. As of June 30, 2026, combined client assets reached $10 trillion.

Financial Flexibility and Capital Returns: Morgan Stanley has a solid balance sheet and capital position, providing flexibility to support client activity, invest in technology, and return capital to shareholders. As of June 30, 2026, long-term debt outstanding was $383.16 billion, with $34.3 billion maturing over the next 12 months. Average liquidity resources were $404.1 billion. The company ended the second quarter of 2026 with a standardized CET1 ratio of 14.8%, maintaining a 300-350 basis point capital cushion above requirements. It has accreted $18 billion of CET1 capital over the last 10 quarters, further strengthening its financial flexibility.

Following the clearance of the 2026 stress test, Morgan Stanley increased its quarterly dividend by 15% to $1.15 per share in the third quarter of 2026 and reauthorized a multi-year share repurchase program of up to $20 billion without an expiration date. Management continues to prioritize organic investment, capital returns, and selective bolt-on acquisitions, positioning the company to support growth while maintaining disciplined capital allocation.

Improving Investment Banking Trends: After the deal slowdown in 2022 and 2023, Morgan Stanley’s investment banking (IB) franchise continues to recover as issuance and strategic activity improve. IB fees rose 35% in 2024 and 23% in 2025, with momentum accelerating in the first half of 2026 as fees jumped 47% year over year. A robust and diversified pipeline across regions, improving M&A and IPO activity, and Morgan Stanley’s strong competitive position will likely support further growth as deal-making conditions improve.

Expanding Global Footprint: Morgan Stanley’s alliance with Mitsubishi UFJ Financial Group strengthens its competitive position in Japan through integrated research, sales, execution and underwriting capabilities. Asia revenues rose 23% year over year to $9.42 billion in 2025, with momentum continuing into the first half of 2026, driven by stronger client engagement and prime brokerage activity. Its expanding regional presence across Japan, India, China, Korea, Taiwan and Hong Kong positions the company to capture further capital markets and wealth management opportunities.

Morgan Stanley’s Near-Term Headwinds

Trading Cyclicality: Morgan Stanley’s significant reliance on trading revenues remains a concern given the business’s inherently cyclical nature. Trading activity has rebounded sharply following weakness in 2023, supported by favorable market conditions, elevated volatility, and strong client engagement. However, management has cautioned about potential frothiness in equity markets, particularly AI-related stocks. A normalization in volatility, issuance activity or client risk appetite could make current trading levels difficult to sustain, increasing quarterly revenue variability across market-sensitive businesses.

Rising Expense Base: Morgan Stanley’s expenses have continued to rise despite restructuring and cost-efficiency efforts, increasing at a 7.4% CAGR over the five years ended 2025. As shown in the chart, total expenses have accelerated since 2023 and reached approximately $57.7 billion on a trailing-twelve-month (TTM) basis in 2026. The trend is likely to persist as management increases spending on technology, AI, and data infrastructure. While these investments could support long-term growth, a higher cost base is likely to put pressure on operating leverage if revenue growth moderates.

Expense Trend

Image Source: Zacks Investment Research

Should You Invest in Morgan Stanley Stock Now?

The company has surpassed consensus earnings expectations in recent quarters, and the Zacks Consensus Estimate implies continued earnings growth through 2026 and 2027. The consensus estimate for 2026 earnings of $12.79 per share and 2027 earnings of $13.06 implies a rise from $10.21 in 2025. This reinforces the earnings power of its broader franchise and management’s expectations of steady improvement in its core operations.

Earnings Estimates

Image Source: Zacks Investment Research

Morgan Stanley’s diversified revenue base, improving IB activity, strong capital position, and expanding global footprint are expected to support its long-term growth. The continued expansion of wealth and investment management businesses, along with improving deal-making activity, should help the company capitalize on favorable market conditions. Moreover, strong capital levels provide flexibility to invest in growth initiatives while supporting shareholder returns through dividends and share repurchases.

In terms of its valuation, Morgan Stanley stock is currently trading at a trailing 12-month price-to-earnings (P/E) ratio of 17.32, compared with the industry average of 15.78. This indicates that MS is currently trading at a premium to its industry.

P/E TTM

Image Source: Zacks Investment Research

Morgan Stanley trades at a premium to Citigroup, while it is inexpensive compared with Goldman Sachs. At present, Citigroup has a trailing 12-month P/E of 12.83X, while Goldman Sachs trades at a trailing 12-month P/E of 16.04X.

Despite its strong fundamentals and improving earnings outlook, it does not seem a wise idea to invest in MS stock now. The company remains exposed to the cyclical nature of trading and capital markets activity, while persistent expense growth could weigh on operating leverage if revenue growth moderates. 

Nevertheless, those who already own MS stock can hold on to it for long-term gains. Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research