UPDATE: Morgan Stanley Initiates Pepco Holdings at Equal-Weight on Valuation

In a report published Monday, Morgan Stanley analyst Stephen C. Byrd initiated coverage on Pepco Holdings POM with an Equal-Weight rating and $20.00 price target.

In the report, Morgan Stanley noted, “POM has underperformed YTD, and shares now trade in line on our 2015e. In our view, current valuation is appropriate given above-average EPS growth and yield, offset by downside risks from less-than-supportive regulatory environments...Initiating coverage of POM at Equal-weight with a $20 PT. The total return in our base case is a modest 5%, in line with many of our EW-rated stocks, but the risk-reward is skewed to the positive for POM's shares, with the potential for regulatory improvements that can propel even better EPS growth.”

Pepco Holdings closed on Friday at $20.42.