UPDATE: Morgan Stanley Reiterates on ITT Educational Services on Multiple Risk Factors

In a report published Monday, Morgan Stanley analyst Suzanne E. Stein reiterated an Equal-Weight rating on

, but lowered the price target from $28.00 to $27.00. In the report, Morgan Stanley noted, “We adjusted our model to include a fair value of PEAKS obligations (including legal costs) at year end of $164 million (or $7 per share). Our estimate remains unchanged but moving the payments forward in time resulted in a lower valuation as $120m of this liability will occur in 2014. Despite ESI's $70m increase in payments, we believe most of the payments simply accelerate the cash flow impact we had already modeled. We also took this opportunity to lower our 2014 starts estimate to reflect potential gainful employment driven changes to program mix. "Despite the negative revisions, our price target only declines $1 as much of this appears already priced into shares. We see a wide range of potential outcomes given the multitude of unresolved issues and despite well-defined bull and bear cases, we view the shares as very high risk (in either direction) and thus maintain our EW outlook.” ITT Educational Services closed on Friday at $29.95.