Bernstein Bull Hintz Claims Morgan Stanley (MS) 'Worth More Dead Than Alive'
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Price: $207.45 -3.16%
Rating Summary:
22 Buy, 17 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
22 Buy, 17 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Bernstein banking analyst Charles Hintz put out a rather sobering (yet bullish) note on Morgan Stanley (NYSE: MS) Friday morning, saying the stock is "worth more dead than alive."
Hintz's thesis stems from his analysis of a liquidation of Morgan Stanley's sales and trading operations, a segment which currently accounts for about 80 percent of the bank's balance sheet.
"We have long argued that absent a liquidity crisis, the mark-to-market balance sheets of Wall Street trading firms support a trough valuation at tangible book value. This is because at low valuations, an acquirer could simply liquidate the trading balance sheet, pay off the liabilities and walk away with more cash than they paid for the company," Hintz said.
The Bernstein analyst warns he is not endorsing such a liquidation, rather that current valuation indicates investors are becoming extremely impatient with the turnaround effort at Morgan Stanley. Hintz said the bank's stock is currently "highly undervalued" even in the most bearish of scenarios.
Hintz maintains an Outperform rating and $35 price target on Morgan Stanley shares.
The analysis follows sharp downside in shares of Morgan Stanley since highs set in February (down 28 percent vs. a 3.5 percent decline in the Dow and nearly 15 percent decline in the XLF) and, more recently, earnings estimates which have been slashed by at least six analyst firms.
Morgan Stanley shares are continuing lower Friday, now down 1 percent to $22.26 even amid the analysts convicted call.
Hintz's thesis stems from his analysis of a liquidation of Morgan Stanley's sales and trading operations, a segment which currently accounts for about 80 percent of the bank's balance sheet.
"We have long argued that absent a liquidity crisis, the mark-to-market balance sheets of Wall Street trading firms support a trough valuation at tangible book value. This is because at low valuations, an acquirer could simply liquidate the trading balance sheet, pay off the liabilities and walk away with more cash than they paid for the company," Hintz said.
The Bernstein analyst warns he is not endorsing such a liquidation, rather that current valuation indicates investors are becoming extremely impatient with the turnaround effort at Morgan Stanley. Hintz said the bank's stock is currently "highly undervalued" even in the most bearish of scenarios.
Hintz maintains an Outperform rating and $35 price target on Morgan Stanley shares.
The analysis follows sharp downside in shares of Morgan Stanley since highs set in February (down 28 percent vs. a 3.5 percent decline in the Dow and nearly 15 percent decline in the XLF) and, more recently, earnings estimates which have been slashed by at least six analyst firms.
Morgan Stanley shares are continuing lower Friday, now down 1 percent to $22.26 even amid the analysts convicted call.
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