UPDATE: Morgan Stanley Upgrades H&R Block to Equal-Weight on Potential Affordable Care Act Windfall

In a report published Friday, Morgan Stanley Upgraded H&R Block

to Equal-Weight and raised its PT from $17 to $23. Morgan Stanley reported that, “We assume HRB grows assisted volumes 4.4%, driven by market growth 1% above IRS forecasts (IRS officials have told us its latest forecasts include upside from the Affordable Care Act, but IRS has not been perfect at forecasting in the past) and HRB's assisted business takes market share because of the added complexity / HRB's smart marketing. We do not include pricing upside from the ACA – we believe it's still unclear if the IRS will require another form, with HRB management on Thursday's call noting that Massachusetts is not a good proxy for the rest of the country. In addition, the assisted tax prep industry remains very competitive (as the dominant player, HRB still only has 18% market share, the 2nd largest company has only 3% share). If there is a permanent increase in the number of filers, given high retention and referral rates, we would expect companies would be aggressive on price to secure these customers long-term. Shares of H&R Block closed at $24.98 on Thursday.