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Morgan Stanley, Some Regional Banks Could Soar in 2013

MS will step into the earnings confessional on Friday before the markets open to report on its 2012 fourth quarter. The average estimate on EPS is 27 cents compared to the year-ago quarterly loss of 14 cents.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

The consensus estimate on revenue is also looking bright for MS. Analysts' average estimate is for sales growth for the quarter of $7.02 billion, almost a 23% increase over the same quarter in 2011. MS is coming off a string of disappointing quarters, and if Friday's report is a disappointment, look out below!

That might set the stage for a correction that will suppress Morgan Stanley's share price low enough that patient investors can buy shares closer to where Loeb's hedge fund did its purchasing. The one-year chart below illustrates what we've seen and what may be about to unfold. MS Chart MS data by YCharts

As you can plainly see from the chart, MS' quarterly revenue-per-share numbers better be extraordinary to help support the current share price, which closed on Wednesday at $20.54. A recent Forbes article presented more details concerning Dan Loeb's "Morgan Stanley bet."

As often happens when activist investors get involved, Loeb's investment may be the catalyst for a major shakeup of the MS board of directors. "CLSA analyst Mike Mayo thinks that a little pressure from Third Point might just help Morgan Stanley capture more of its franchise value," the Forbes article stated.

To give us some perspective as to where MS shares may be 12 months from now, the Forbes article went on to say, ""Mayo has a 12-month price target of $27 on Morgan Stanley, but estimates the business' franchise value at around $40 per share. That squares up with Loeb, who writes that the combination of a FICC restructuring, a stronger board and a generally constructive macro environment means shares should 'nearly double' from recent levels."

That would be especially doable if shares corrected to below $18, but only time will tell.

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