On Sept 16, Argus Research downgraded MS from Buy to Hold.
This article by Robert Reed explains:
It’s Morgan Stanley’s turn in the
spotlight. Whether it likes it or not.
Morgan reports quarterly earnings
tomorrow, and there’s investor concern the
results will fall below expectations. More disturbing:
The possibility the investment bank’s balance sheet
is fast deteriorating, brought down by heavy exposure to the
subprime mortgage market and other weak investments.
While Morgan is expected to miss analysts’ earnings
consensus of 80 cents per share, a really lousy earnings
report and business forecast could sink the stock price. A severe
drop could force Morgan to hunt for a deep-pocketed
savior.
Under that scenario, Morgan could end up selling to a commercial
bank and following a path taken this week by competitor
Merrill Lynch, which was acquired for $50 billion in stock by Bank
of America.
Right now, investors are bracing for bad news. Argus Research just downgraded Morgan’s stock to a hold from
a buy.
At least one observer thinks Morgan’s fate is
already sealed. Economist Nouriel Roubini, who has
been extremely bearish but accurate about the depth of this
financial crisis, predicts that independent investment houses like
Morgan and Goldman Sachs are on the way
out.
He’s urging Morgan and Goldman to quickly find
buyers.