This private equity stock is set to jump after U.S. and China reach trade deal, Morgan Stanley says

CNBC

14-05-2025

Morgan Stanley moved off the sidelines on KKR after the China-U.S. trade deal sweetened the macro outlook. Analyst Michael Cyprys upgraded shares of the investment management firm to overweight from equal weight and hiked his price target by $30 to $150. Cyprys' new target implies upside of 18.2% over Tuesday's close. Cyprys' call comes after the U.S. and China agreed to temporarily slash reciprocal levies on one another following weekend negotiations. The announcement eased investor fears of a trade war between the two countries and sparked a major market rally in U.S. stocks on Monday. "[We're] leaning into risk ... on the back of greater than expected tariff de-escalation with China and scope for better than feared macro path ahead with lower recession probability, less upward inflation pressure and reduced tail risk," Cyprys wrote in a Wednesday note to clients. "Combined, these macro conditions can improve market confidence in a potential capital markets recovery and re-accelerate the private markets flywheel, supporting a robust earnings outlook for KKR." Cyprys said KKR should be able to benefit from secular tailwinds within private markets such as private credit, private wealth and insurance. The firm also raised its earnings per share outlooks for 2025 and 2026. More broadly, the analyst said the stock is a way to play a recovery in capital markets. Cyprys said KKR is in a particular good stock to capture upside given it is a high-quality growth franchise. Despite shares rising about 0.5% before the bell Wednesday, the stock has dropped more than 14% in 2025. That decline puts shares at an "attractive" spot for investors, he said. Cyprys' upgrade puts him in line with the majority of analysts on Wall Street with buy-equivalent ratings, per LSEG.