News After the Close Could Bring Price Target Changes for 2 Holdings
Here's what to watch from these Pro Portfolio names.
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Pro Portfolio positions Morgan Stanley MS and Bank of America BAC have seen very nice moves inover the last several weeks. Earlier this week, we received upbeat comments from Jefferies about trading volumes and investment banking activity, the latter of which is benefiting from a combination of M&A, IPO, and advisory services activity. We recognized that pick-up in activity and lifted our MS price target to $145 from $140 to account for Morgan Stanley’s business mix, which should benefit more than BofA’s given its consumer banking business.
Depending on what we learn after today’s market close, when the Federal Reserve releases the findings of its latest bank “stress tests,” we, and others across Wall Street, may have to do some additional fine-tuning of price targets. As I mentioned over at the Daily Diary, the expectation is that a less-strenuous methodology for this year’s test means most, if not all, banks should clear with flying colors.
This matters because after showing they have ample capital on hand to withstand a severe economic downturn, banks that pass the “stress tests” can now revisit dividend payments to shareholders and funding for stock repurchase programs.
Last year, the Fed published its 2024 stress test results on Friday, June 28, and that same day, BofA announced it would increase its quarterly dividend to $0.26 per share, up from $0.24. Morgan Stanley, also on June 28, said it would increase its quarterly dividend to $0.925 per share from $0.85.
We believe both companies could make similar announcements after today’s market close. If that happens, and we would be surprised if it didn’t, based on the size of their dividend increases, we’ll revisit our MS and BAC price targets as needed. The same goes for our current pick-up points of $120 and $41 for MS and BAC, respectively.
Note: A reminder that the June Monthly Roundup will be published on Monday.
At the time of publication, TheStreet Pro Portfolio was long MS and BAC.
