Citi downgraded Morgan Stanley to neutral from buy on Thursday, saying the stock is "fairly valued."

Morgan Stanley posted better-than-expected first-quarter results Wednesday thanks to the growth in wealth management and fixed-income trading, sending its shares 2.6% higher. Citi thinks that after the earnings boost, Morgan Stanley's stock is in line with its target and has little room to grow.

"Though we believe MS has very high quality franchises and has the potential to continue to gain market share, we'd rather be on the sidelines in the near-term," Citi analyst Keith Horowitz said in a note.

Shares of Morgan Stanley are up 22% year to date, trading at $48.26 at Wednesday's close, slightly above Citi's 12-month price target of $48. The stock was down about 0.5% in Thursday morning trading.

Citi ramped up earnings estimates for Morgan Stanley after its solid performance in the first quarter. The 2019 EPS forecast went up 30 cents to $5.05, and $5.55 for 2020.

"Strong 1Q19 results were driven by FICC and expense management," Horowitz said. "Global Wealth Management beat expectations and [management] reiterated guidance for mid-single [net interest income] digit growth in 2019, in contrast to others in the peer group which has generally tempered NII expectations during this earnings season."