(MS - Get Report)
to a "Neutral" rating from a "Buy" rating, while maintaining his price target of $19.00.
Morgan Stanley's shares closed at $17.57 Wednesday, returning 17% year-to-date, following last year's 44% decline. The shares trade for 0.6 times their reported June 30 tangible book value of $31.02, and for nine times the consensus 2013 EPS estimate of $1.95.
Hawken estimates that Morgan Stanley will earn a dollar a share for 2012, increasing to earnings of $2.10 a share in 2013.
The analyst said that "MS has made a number of strategic missteps in recent years and has struggled to generate optimal returns for shareholders... as a result, the stock has struggled relative to its peers, and become a 'show me' story."
Once again, the longer-term view is brighter. Hawken said "the firm still has significant brand equity and many of the pieces in place to return the firm to prominence once again."
"While MS is facing several unique threats, its capital and liquidity positions have improved dramatically, and we believe its valuation is attractive even in a relatively severe environment," he said, adding that "the key to a higher multiple for the stock will be to improve the capital efficiency and returns in MS's struggling [trading] business and driving [Morgan Stanley Smith Barney] margins higher."
Interested in more on Morgan Stanley? See TheStreet Ratings' report card for this stock.