Morgan Stanley Stock Eyes Five Straight After Earnings Beat

The equity is now up 20% year-over-year

Digital Content Manager
Jul 16, 2020 at 10:49 AM
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The shares of Morgan Stanley (NYSE: MS) are up 2.1% at $52.41 this morning, after the multinational investment bank reported second-quarter profits of $1.96 per share on $13.4 billion in revenue, blowing past Wall Street's estimated $1.12 on $10.31 billion. The company attributed the impressive results to a decade-long plan that balances the stability of the wealth management business, and a minimal exposure to consumer loans against the unpredictability of its trading business. 

On the charts, MS has been slowly recovering from its mid-March, four-year lows near the $27 level. During the rally since then, the stock's 40-day moving average contained pullbacks in May and July, while a five-day winning streak helps MS reclaim its year-to-date breakeven level. Longer term, MS sports a 20% year-over-year lead.

No bull notes have come down the pike today, and that's probably because analysts were mostly optimistic toward MS already, with eight of the 13 in coverage sporting a "strong buy" rating and no "sells" to be found. However, the stock's consensus price target of $54.15 is a slim 3.1% premium to current levels, so if there is a shift in analyst attention, it could be in the form of price-target hikes. 

That upbeat sentiment is echoed in the options pits, where calls are popular. In the last 10 days, 3.61 calls were bought for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 90% of readings from the past year, meaning calls are being picked up at a faster-than-usual clip.

As of today, the options pits are exploding with calls. At last check, call trading was sitting at seven times the average intraday amount, and more than six times the number of puts traded. Most popular by far is the June 52 call, followed by the weekly 7/24 52-strike call, with new positions are being opened at the latter. Buyers of this call are banking on more gains from MS stock by the end of next week, when the options expire.

Also worth noting is Morgan Stanley stock's Schaeffer's Volatility Scorecard (SVS), which sits at a relatively high 91 out of 100. In simpler terms, the stock has tended to exceed option traders' volatility expectations during the past year, a good thing for option buyers.

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