UPDATE: Morgan Stanley Reiterates Overweight Rating, Lowers PT on Performant Financial Corp. on Challenges Ahead

In a report published Friday, Morgan Stanley analyst Suzanne E. Stein reiterated an Overweight rating on Performant Financial Corp. PFMT, but lowered the price target from $13.00 to $12.00. In the report, Morgan Stanley noted, “Model changes reflect a pause in the RAC program and pressure on GA revenues. Our base case assumes the wind down of the Medicare RAC contract by 3Q14 and a slow ramp of a new contract (which has more of an impact on F15). In student lending, we model a cut to fees from the Guarantee Agencies (GAs) beginning July 1, and assume Performant wins the renewal of the Department of Education (ED) contract. Our F14 forecast is at the low end of management's guidance and we model a recovery in F15 as a new healthcare contract ramps up. The award of the RAC contract should be a significant catalyst for the stock.” Performant Financial Corp. closed on Thursday at $7.23.