UPDATE: Morgan Stanley Downgrades Frontier Communications Corp

In a note released Wednesday morning, Morgan Stanley analyst Simon Flannery downgraded shares of Frontier Communications Corp FTR from Equal-weight to Underweight and set a $5.20 price target.

Flannery commented, "In conjunction with the downgrade of our Telecom industry view to Cautious, we are downgrading Frontier to Underweight due to valuation, secular pressures, and deal overhang related to the AT&T/CT transaction."

Providing more detail on these topics, Flannery noted that due to "strong performance" Frontier currently trades at a premium to peers, the company will likely face both top and bottom-line pressure from building competition, and the purchase of lines from AT&T presents near-term integration risks.

Additionally, he noted the $5.20 price target represents 23 percent downside risk.