Morgan Stanley Taps 2 Stocks as Its Top Picks for 2026
We’re well into the second quarter of 2026, and the market’s trajectory remains uncertain. After bottoming out in late March, the S&P 500 has staged a strong rebound and is now back at record levels despite lingering geopolitical and inflation concerns.
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That resilience is being supported by various factors, including confidence in corporate earnings, progress in peace talks, albeit fragile, and strong U.S. oil exports.
Summing up the situation, with a particularly keen eye on earnings, Morgan Stanley equity strategist Mike Wilson writes: “S&P 500 trailing earnings growth is now 15%, and next twelve month earnings is up over 20% Y/Y. Earnings revisions breadth (currently 8%) has remained resilient since the Iran war started, and the 1Q and 2Q 2026 EPS estimates for the S&P are up since the end of February (+1% and +4%, respectively).”
“Leading indicators point to a continuation of positive operating leverage, and AI adoption is a margin tailwind. The earnings upside isn’t just limited to the S&P 500. The S&P 600 Small Cap Index earnings growth is also strong at 14%. We are encouraged that earnings revisions breadth for many cyclical areas of the market has improved since the end of February even amid the geopolitical risks,” Wilson added.
Wilson’s colleagues among the Morgan Stanley stock analysts have internalized this logic, and have tapped 2 stocks as ‘top picks’ for 2026. A closer look at the TipRanks data shows both also carry Strong Buy ratings across the Street. Here’s what’s driving the conviction.
T-Mobile US(TMUS)
The first stock we’ll look at today is T-Mobile, instantly recognizable as one of the largest telecom companies currently operating in the US market. T-Mobile has a market cap of $209 billion, higher than runners-up Verizon and AT&T.
T-Mobile has achieved this leading position the old-fashioned way: by offering its customers the products and services that they want. This has brought the company to industry-leading customer addition metrics. In 4Q25, the last period reported, T-Mobile added 2.4 million total postpaid net customer additions, and 7.8 million for the whole of 2025. The company’s services include phone, net, and broadband, and T-Mobile has become well-known for its deals on new smartphones, including iPhone products.
The company is increasingly popular for its customer service, and for the variety of service plans it offers. Potential customers can find plans and deals tailored for adults over 55, for military veterans, and for first responders, in addition to the standard unlimited phone plans. Other plans include watch and tablet devices, fiber or 5G home internet, and business phone plans. New customers can buy a device through T-Mobile when opening a plan, or migrate in existing devices. T-Mobile can offer deals with Apple, Samsung, Motorola, and Google, and it boasts an extensive 5G coverage map.
For Morgan Stanley analyst Sean Diffley, the key here is T-Mobile’s ongoing ability to generate consistent customer growth. He writes of the company, “T-Mobile has the strongest account growth in the industry while running neck and neck with VZ on total accounts (>34mm), but has maintained the challenger energy with continued innovation and the most attractive offerings, in our view. We name T-Mobile our Top Pick, driven by the strongest growth profile in the space. TMUS benefits from the most favorable back-book pricing position, improving network perception and brand strength, and supportive technicals. The valuation remains attractive especially on a growth-adjusted basis, particularly as the stock has materially lagged peers YTD.”
Following from this, Diffley puts an Overweight (Buy) rating on the shares, with a $260 price target that points to a one-year upside potential of 31.5%. (To watch Diffley’s track record, click here)
Currently, TMUS shares are trading for $197.67, and the $260.29 average price target neatly matches the Morgan Stanley view and its 31%-plus upside. The stock has a Strong Buy consensus rating on Wall Street, based on 18 reviews that include 18 Buys over 3 Holds. (See TMUS stock forecast)
Affirm Holdings(AFRM)
Next, we’ll switch to a fintech company, Affirm Holdings. Affirm deals with digital payments and specializes in point-of-sale loans. Affirm also facilitates e-commerce, and gives financial services to both the merchant and buyer side of transactions. The company boasts that it offers fee-free buy-now, pay-later plans, designed to match the user’s budget.
From the user side, this comes down to smartphone apps, and customer accounts with options for making purchases at a wide range of real-world locations. The company offers the Affirm debit card, which can be used as a charge card but which features strict limits, established up-front by the user, to avoid overstepping debt limits. Affirm’s system is designed to facilitate spending while helping users to stick to their budget.
Affirm does all of this while remaining transparent for the users. As noted, the company does not charge fees to shoppers using its services; the company also allows purchase payment terms to be arranged in advance, so that users will know what they are getting into. Payment and budget plans can be set for 3 months, 6 months, or 12 months. The company does charge interest on loans, but the bulk of its income comes from vendor commissions. At first glance, this arrangement sounds like it is lopsidedly in favor of the spender – but for merchants, it offers the assurance that customers using Affirm for payments will have those payments clear.
This suite of advantages has made Affirm a favorite with such companies as The Home Depot, Apple, Target, Sam’s Club, Lowe’s, Dick’s Sporting Goods – it’s a long list. And building itself into a favorite with both merchants and buyers has helped this $20 billion fintech company to generate sound results. The company works with 26 million active consumers, and saw $43 billion in gross merchandise volume in the twelve months ending this past December 31.
Affirm’s last set of financial results covered fiscal 2Q26 (December quarter). Revenue in the period came to $1.12 billion, and beat the estimates by $67.3 million while growing over 29% year. The company’s bottom line, reported as a GAAP EPS of 37 cents, was 10 cents per share better than had been anticipated.
We should note that Affirm’s revenue has been climbing over the past few years, and that brings us to the view of James Faucette, who, in his write-up on the stock for Morgan Stanley, sees a clear path for further gains. He says of the stock, “We are elevating AFRM to Top Pick because we see a particularly attractive setup over the next six months: a high probability of upward estimate revisions, a credible path to resolving the private credit overhang, and catalysts that could sharpen the market’s view of the company’s medium-term earnings power… Against that backdrop, the stock’s valuation remains compelling: at ~19x our FY28 GAAP diluted EPS estimate of $3.21, for a ~64% FY26- FY28 CAGR, AFRM offers what we view as one of the most attractive risk-reward setups in our coverage.”
Faucette’s Overweight (Buy) rating here is backed up by a $76 price target that suggests a gain of 18% in the coming year. (To watch Faucette’s track record, click here)
Affirm has picked up 22 recent analyst reviews, and the 17 to 5 split of Buy to Hold gives the stock its Strong Buy consensus rating. The shares are priced at $64.50 and the $82.30 average target price implies a 12-month gain of 28%. (See AFRM stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
