The market is now about right about next year's earnings. Stronger evidence that client financing supports trading revenue, alongside growing wealth fees, leads me to withdraw my sell and raise my twelve-month target to $182.93.
Key points
- $5.3 billion quarterly is my 2027 equity-market revenue forecast, above my previous estimate.
- $38.5 billion annually is my 2027 wealth revenue forecast, supported by growing customer fees.
- $182.93 a share is my October 2027 target; I move from sell to hold.
The call
The market is about right about earnings durability. At my 14.5-times earnings multiple, today's price requires annual earnings of $12.52 a share. That implies a 31% pre-tax margin on my 2027 revenue forecast, meaning revenue left after expenses but before taxes. Wealth growth can offset softer trading without another record year.
Equity markets outgrow recurring fees ($ billions quarterly)- Q3 2025 reported
- Q3 2026 reported
Source: October 14, 2026 earnings release; same-quarter GAAP comparisons.
I expect less trading normalization than before. Goldman Sachs reports financing demand exceeding industry capacity, supporting Morgan Stanley's account of stronger client borrowing. My equity-market forecast remains below September's result. Growing wealth fees and next year's bank-funding benefits support earnings, but higher deposit costs and concentrated asset inflows argue against extrapolating the quarter.
Valuation
| Driver | My estimate |
|---|
| 2027 net revenue | $84.4 billion |
| 2027 pre-tax income | $26.3 billion |
| 2027 diluted earnings | $12.62 a share |
| Core earnings multiple | 14 times |
| Integrated wealth-franchise premium | 0.5 times |
| October 2027 target | $182.93 a share |
Earnings assume a 23% tax rate, $850 million for preferred dividends and outside ownership, and 1.54 billion diluted shares. The franchise premium rewards customer conversion across workplace, brokerage and advice; persistent conversion failures would remove it. Trading remains cyclical, and the scenario table shows why neither a buy nor a renewed sell offers compelling asymmetry.
The earnings multiple matters more than trading normalization$4.5bn quarterly$4.8bn quarterly$5.3bn quarterly$5.8bn quarterly$6.3bn quarterlyMy forecast: 12 times$145.2$147.5$151.4$155.2$159.1
My forecast: 14 times$169.4$172.1$176.6$181.1$185.6
My forecast: 14.5 times$175.5$178.3$182.9$187.6$192.2
My forecast: 16 times$193.7$196.7$201.8$207$212.1
My forecast: 18 times$217.9$221.3$227.1$232.8$238.6
My October 14, 2026 scenarios: target dollars; columns are 2027 quarterly equity-market revenue.
Risks
- Higher rates stall deals and depress customer assets: watch completed banking fees and wealth advisory balances.
- Financing proves less durable: watch equity-market revenue and client balances as market activity slows.
- Asset gathering disappoints: watch fee revenue, retirement-mandate economics and retained assets after IPO selling restrictions expire; headline inflows alone are insufficient.
What would change my mind
Two consecutive quarters with equity-market revenue below $4.8 billion and wealth pre-tax margins below 30% would overturn my earnings forecast.