Morgan Stanley Upgrades KKR to Buy, Targets 25% Gain on Tariff Reduction

Morgan Stanley has upgraded its rating for KKR & Co. Inc. (KKR.US), an alternative asset management company, from "Hold" to "Buy," and raised its target price from $120 to $150. This move is driven by the firm's optimistic outlook on the recovery of the capital markets. Analyst Michael J. Cypres highlighted that the reduction in tariffs between the U.S. and China exceeded expectations, paving the way for a better-than-anticipated macroeconomic environment. This development has lowered the likelihood of a recession and eased inflationary pressures, thereby reducing tail risks.

Cypres noted that these macroeconomic conditions could bolster market confidence in a potential capital market recovery and accelerate the momentum in private markets, supporting KKR's robust earnings outlook. He also pointed out that the transparency of trade policies has improved compared to the beginning of the year, and the potential for tail risks to be mitigated has made the stock's 15% year-to-date decline an attractive entry point.

Morgan Stanley also increased its earnings per share forecast for KKR in 2026 by 4.5%. The firm's positive stance on the capital markets' recovery is underpinned by the expectation that the reduction in tariffs will enhance market confidence and drive private market activity, ultimately benefiting KKR's financial performance. The upgrade reflects a broader optimism about the economic outlook and the potential for increased investment activity in the capital markets, which KKR is well-positioned to capitalize on.