Morgan Stanley (NYSE: MS), one of the biggest players in Wall Street, released its long and short ideas for 2024. The company is broadly bearish on US equities in 2024 even as investors brace for key tailwinds like earnings growth and low interest rates.
Morgan Stanley’s target for the S&P 500 index in 2024 is $4,500, $200 lower than the current level. This view is much lower than those offered by Bank of America, BMO, Goldman Sachs, and Oppenheimer, who expect the index to cross $5,000.
Morgan Stanley, especially its Chief Strategist, Mike Wilson, have been quite bearish in the past few years. While this view worked well in 2022 as stocks imploded, it backfired in 2023 as key indices soared to a record high.
Some of the best ideas for 2024 are Devon Energy (57% upside), NU Holdings (95% upside, and Biogen (41% upside).
Affirm
Morgan Stanley analysts are bearish on one of the top performers in 2023. Affirm (AFRM) stock price surged by more than 463% and MS expects it to drop by almost 60% in 2024.
Affirm shares surged in 2023 as demand for Buy Now Pay Later (BNPL) companies rose in a high-interest environment. Most customers opted for these firms since they charge low or no interest rates in a time when credit cards rates jumped to over 21%.
The average interest rate on a credit card in the US is now over 21%, which is the highest rate in over 30 years. pic.twitter.com/xE026MBKxa
— Pomp 🌪 (@APompliano) November 27, 2023Affirm did well as it maintained relationships with some of the biggest retailers in the US, including Amazon and Walmart. Its revenue continued rising, reaching over $233 million in the third quarter. It also narrowed its loss to $171 million in Q3 from $251 million in the same period in 2021.
However, Morgan Stanley believes that the stock has gotten severely overvalued and that a pullback is likely. Their report said:
“While we believe Affirm is executing well amid its goal of becoming a more meaningful player in the payments landscape, at $44, we believe the market has gotten ahead of itself,”
Etsy
Esty (NASDAQ: ETSY) stock was one of the top laggards in Wall Street as it crashed by over 32%. The company, which was one of the top pandemic winners, has come under pressure as high-interest rates led to weaker discretionary spending.
This view continued in December after the company announced a restructuring process that included deep job cuts. It will slash 11% of Etsy Marketplace workforce and incur between $25 million and $30 million in costs.
Etsy also downgraded its guidance as it lamented the challenges in its business. It expects its revenue to grow by between 2% and 3% while its GMV will slip by about 2%.
Etsy is in a difficult place now that its room for price increases has narrowed. It is almost impossible for the company to increase its transaction and merchant prices. In 2022, the company hiked its transaction fees by 30% leading to a strike among merchants.Morgan Stanley believes that the Etsy stock price has more downside in 2024. They see it crashing by about 22% from the base case. They see the shares crashing to $66. Still, some analysts like those at Guggenheim, Wedbush, Raymond James, and Needham are optimistic about Etsy.
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