Morgan Stanley Upgrades Itau Unibanco (ITUB) to Overweight

Morgan Stanley analyst Jorge Kuri upgraded Itau Unibanco (NYSE: ITUB) from Equalweight to Overweight with a price target of $8.00 (from $7.50).

The analyst comments "Upgrading Itaú to OW from EW based on new higher-for-longer Selic forecast, attractive valuation, stock defensiveness amid weakening macro/political outlook, and top notch management execution. Our PT of US$8.0 offers 38% potential upside. The recent market sell-off provides an attractive entry point for ITUB. The shares have corrected 17% year-to-date, in large part due to deteriorating Brazil sentiment (iBovespa index down 22% year-to-date in USD). Itaú now trades at 1.7x P/BV, and 7.1x 23e P/E and 6.4x 24e P/E. These multiples look attractive relative to our 3-year ROE estimate of 20-21% and our 3-year EPS CAGR estimate of 11%. Our new price target of US$8.0 per share (up from US$7.5 given our higher EPS forecast) offers 38% potential upside. At our target, the shares would be trading at 1.8x year-end 25e P/BV and 8.3x forward P/E — relatively undemanding multiples, we think, given ROE & EPS outlook."

For an analyst ratings summary and ratings history on Itau Unibanco click here. For more ratings news on Itau Unibanco click here.

Shares of Itau Unibanco closed at $5.80 yesterday.

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