Morgan Stanley Sees Good Market Position for H&R Block

In a report published Tuesday, Morgan Stanley analyst Thomas Allen reiterated an Overweight rating and $35.00 price target on

. In the report, Morgan Stanley noted, “We continue to view HRB as well positioned to benefit from the Affordable Care Act as well as taking advantage of its low leverage / buying back stock once the bank sale is officially closed. We forecast a ~15% F13-F16 EPS CAGR and double-digit growth thereafter, supporting our 17x F15 EPS valuation of $35. While we do not believe HRB's core tax business (which is very competitive) deserves a market multiple, our $35 price target is just 14x our F16E EPS (after which we see more limited growth from ACA). "We see a bull case value of $48 driven by a) pricing on ACA forms, b) significant additional filers from ACA, c) Immigration Reform (but excluding a back-tax mandate, which creates an incremental opportunity), and d) a 17x F15 multiple. We've cut our bull case F15 EPS from $2.85 to $2.80 on account of HRB's lost market share impacting potential ACA monetization, but our bull case HRB stock value remains at $48 based on the 17x multiple.” H&R Block closed on Monday at $27.40.