Morgan Stanley, a global financial services company, sees opportunities for investors in “fallen angels,” stocks that have lost substantial value from their highs. Morgan Stanley strategists, in a research note, consider that, “Overall, valuations of some oversold European stocks are reasonably attractive, and not necessarily cheap,” especially because “the fundamental corporate earnings picture is starting to look quite challenging.” Despite the MSCI Europe index trading below the median of its long-term forward price, down nearly 14% this year, Morgan Stanley acknowledged that there are some opportunities in the “fallen angels” list itself.
We recognize that underperformance has been extreme for a number of stocks and sectors. Given this, we believe investors will likely be focusing on names that are starting to look attractive in terms of price/risk. While technically cautious, we believe there is a growing investor appetite to build positions in stocks whose recent underperformance has created an entry point attractive to patient investors. Ross MacDonald, strategy leader at Morgan Stanley.
5 Potential Highlights Among “Fallen Angels”
The French consulting firm can be a “safe haven,” with a Attractive rating due to its relatively defensive record and good performance during the coronavirus pandemic. Capgemini is also exposed to structurally technological issues, and is seen as attractive for its target price of $237 euros (R$1,216) on the share. This implies a potential increase of 31.3% to the share’s closing price of $180.5 euros at the end of last month. Morgan Stanley noted that Deutsche Post, a German postal and express delivery company, invested in the automation and digitalization of its operations, as well as expanding its customer base – resulting in the growth of its capacity and market. Morgan Stanley believes that the Italian multinational’s revenue profile is the more resilient among similar companies in the field of health, providing that the company will achieve 11% compounded earnings growth in five years. this will be mainly driven by product innovation. Morgan Stanley suggests that the French holding company specializing in luxury goods remains the “first choice” in an industry that has been declining since late 2021, describing the company as a “structural market share gainer” in almost every business where it operatesand believing that she must “hold up better” than other companies in an adverse environment. Despite market rotation moving away from tech stocks, Morgan Stanley remains “confident” that the German business management software company can perform “relatively well” in a downturngiven its mix of recurring revenues and its offering products that can help companies reduce costs.
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