(Bloomberg) -- Morgan Stanley, the best-performing stock among the largest Wall Street banks since the end of 2012, will rise at a slower pace over the next year as the current price anticipates the firm reaching its profitability goal, said David Konrad, a Macquarie Group analyst.
Morgan Stanley dropped 1.9%, the most in a month, to $34.04 at 10:37 a.m. in New York as Konrad cut his rating to neutral from a buy recommendation hed held since beginning his coverage in June 2013. The shares have more than doubled in the past two years, and climbed 11% this year through yesterday, more than any of its four biggest U.S. investment bank rivals.
Chief Executive Officer James Gorman has achieved success with his strategy of relying more on wealth and asset management and reducing the size of the firms fixed-income, currency and commodities trading business, Konrad wrote. Still, the company may be limited in its ability to return capital in dividends and buybacks because of the need for regulatory approval and a leverage ratio that lags behind peers, he said.
We believe the shares may take a pause until MS can return significant capital to shareholders and improve the returns of FICC, Konrad wrote, referring to the New York-based company by its stock ticker.
Morgan Stanley shares may rise to $37 over the next 12 months, a 6.6% increase over yesterdays closing price of $34.70, Konrad said. Thats a smaller increase than he estimates for Citigroup and JPMorgan Chase Konrad expects Bank of America and Goldman Sachs Group to decline from yesterdays closing price.
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