Citi downgrades Morgan Stanley after earnings beat, says upside is limited from here

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Despite the downgrade, the firm kept its price target unchanged.

Gains for Morgan Stanley will be harder to come by, according to Citi. Analyst Keith Horowitz downgraded the bank stock to neutral from buy. He kept his price target at $100, which implies the stock will rise just 3% from where it closed Tuesday. "In our view, the market is pricing in best in class returns and we do not see significant relative upside," Horowitz said in a Tuesday note.

Horowitz added that upward revisions to net interest income could be offset by potentially higher expenses and an increase in share count. Other headwinds for banks include a potential recession, another down year across markets and greater regulation, Citi said. Still, the analyst noted that Morgan Stanley is one of the best positioned banks heading in to the year because it has a strong growth engine, low credit risk and good optionality on revenue from its investment banking unit.

 

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