Well Fargo analyst Matthew Burnell, who rates Morgan Stanley "Market Perform," with a valuation range of $13 to $15, said on Wednesday that the Morgan Stanley Smith Barney joint venture was being appraised by "Perella Weinberg Partners LP following valuations by the two companies that resulted in a wide difference of opinion on the value of MSSB."
The analyst went on to say that because Citigroup had previously valued its stake in the joint venture at roughly $11 billion, while Morgan Stanley had valued the stake at about $4.4 billion, "the potential pretax writedown of Citi's stake could exceed $6B if MS' valuation is accepted," Burnell believes "a more likely writedown is in the range of about $4B (before tax) based on current retail broker comps and the MSSB contribution to MS (adjusted for elevated noncore expenses in MSSB) compared to our current estimate of Citi's pretax profit of $4.2B."
Burnell also said that the delay in Citigroup's sale of the joint venture stake to Morgan Stanley "could heighten speculation that the two parties could be working on a larger sale of MSSB than the 14% called upon in the joint venture agreement."
The analyst estimates that Morgan Stanley will earn 90 cents a share for all of 2012, followed by 2013 EPS of $1.75.MS data by YCharts
Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock.
Email. Follow @PhilipvanDoorn
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV