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Morgan Stanley to rally 18% on strong earnings, cheap valuation, Guggenheim says

Peter Foley | Bloomberg | Getty Images

Investors should buy Morgan Stanley shares because earnings will top expectations in the coming year, according to Guggenheim, which raised its rating on the Wall Street firm to buy from neutral.

Analyst Eric Wasserstrom also sees the bank's shares as cheap.

"[We are] upgrading MS ... reflecting improved revenues and operating leverage," Wasserstrom wrote in a note to clients Thursday.

Morgan Stanley reported better-than-expect third quarter earnings Wednesday.