Morgan Stanley’s Rating Cut to Hold by HSBC: Wall Street’s Insight
HSBC recently downgraded Morgan Stanley’s rating from buy to hold, citing weaker guidance for the firm’s wealth management business. The analysts at HSBC have cut their earnings estimates for Morgan Stanley, despite its rising share price. This has resulted in a material increase in the PE (price-to-earnings) ratio, signaling a softening outlook for wealth management revenue. The downgrade comes ahead of Morgan Stanley’s upcoming earnings release on January 16th.
The CNBC Investing Club agrees with the decision of HSBC analysts to step to the sidelines. While bank stocks have seen a strong performance in recent months, high expectations heading into earnings can often lead to sell-the-news events. The weakness in Morgan Stanley’s Wealth Management unit was the main driver behind the stock’s decline in October. However, the Club believes that Morgan Stanley still has strong growth prospects in its investment banking segment, which can improve on a better macroeconomic outlook and an increase in deal activity.
Apple Downgraded by Redburn Atlantic: Limited Growth Opportunities
Redburn Atlantic recently downgraded Apple’s shares from buy to neutral, citing limited growth opportunities. The analysts at Redburn Atlantic predict that while the iPhone may return to growth in 2024, there is little room for upside in the next few years. They also highlight rising regulatory risk that could impact Apple’s ability to monetize its ecosystem. These concerns have led to a more cautious outlook for the company’s performance in the upcoming March quarter.
The CNBC Investing Club agrees that after Apple’s significant gain in 2023, it is reasonable to expect its shares to cool off in the new year. The Club has trimmed its Apple position, along with several other tech holdings, in anticipation of investors allocating to other high-quality areas of the market. However, the Club still maintains its “hold it, don’t trade it” mantra on Apple. Ongoing services revenue growth and the upcoming launch of the Vision Pro have the potential to change the narrative around sluggish iPhone sales.
Palo Alto Networks Named Top Cybersecurity Pick by Morgan Stanley
Morgan Stanley recently named Palo Alto Networks as its top cybersecurity pick. The firm highlighted multiple growth drivers and rising security threats as tailwinds for the sector in 2024. The analysts at Morgan Stanley have confidence in the durability of Palo Alto Networks’ growth and its broader platform adoption. They also believe that the stock’s valuation is becoming increasingly attractive, making it a favorable investment.
The CNBC Investing Club has consistently expressed its optimism about Palo Alto Networks. The Club believes that Palo Alto will outperform its peers and gain market share as businesses consolidate their security budgets around providers that offer a full suite of solutions. This long-term trend has helped Palo Alto become the first cybersecurity company to reach a $100 billion market cap, and the Club believes that this is not the ceiling for the company.
Salesforce Upgraded to Buy by Baird: Margins and Sales Execution Key
Baird recently upgraded Salesforce stock from hold to buy. The analysts at Baird underestimated the company’s willingness to deliver margins, which drove strong performance last year. With the current valuation near historical lows, muted expectations for top-line growth, and potential factors like price increases, the return of front-office spend, and crisper sales execution, Baird sees upside potential from current levels.
The CNBC Investing Club believes that Baird’s upgrade came a bit too late. Salesforce has already seen a significant surge in 2023 as the company embraced the input of activist investors and committed to margin expansion. However, after such a strong performance, it is not unusual for a stock to take a breather. Investors should be cautious about jumping the gun on gains of this size.
Wall Street Analysts’ Bold Predictions for Four Portfolio Stocks
Wall Street analysts have made bold predictions about four portfolio stocks this week. HSBC downgraded Morgan Stanley’s rating to hold, citing weaker guidance for the firm’s wealth management business. Redburn Atlantic downgraded Apple to neutral, citing limited growth opportunities and rising regulatory risks. Morgan Stanley named Palo Alto Networks its top cybersecurity pick, citing multiple growth drivers and rising security threats. Baird upgraded Salesforce stock to buy, highlighting the company’s potential for margin expansion and sales execution.
As subscribers to the CNBC Investing Club with Jim Cramer, investors have access to trade alerts before Jim makes a trade. Jim waits a specified time before buying or selling a stock in his charitable trust’s portfolio to avoid any conflicts of interest. However, the Club emphasizes that no specific outcome or profit is guaranteed when investing in the stock market.
Analyst comment
1. Morgan Stanley’s Rating Cut to Hold by HSBC: Wall Street’s Insight – Negative news. Analysts expect a softening outlook for wealth management revenue, leading to a decline in Morgan Stanley’s stock.
2. Apple Downgraded by Redburn Atlantic: Limited Growth Opportunities – Negative news. Limited growth opportunities and rising regulatory risk could impact Apple’s performance in the upcoming quarter.
3. Palo Alto Networks Named Top Cybersecurity Pick by Morgan Stanley – Positive news. Palo Alto Networks is expected to outperform its peers and gain market share, with an attractive valuation.
4. Salesforce Upgraded to Buy by Baird: Margins and Sales Execution Key – Positive news. Salesforce has potential for margin expansion and improved sales execution, although its recent surge may limit short-term gains.
5. Wall Street Analysts’ Bold Predictions for Four Portfolio Stocks – Mixed news. Downgrades for Morgan Stanley and Apple, positive outlook for Palo Alto Networks, and an upgrade for Salesforce, highlighting various market trends. No specific outcome or profit guaranteed.
