UPDATE: ISI Group Downgrades Pinnacle Entertainment to Neutral on Mixed Factors

In a report published Monday, ISI Group analyst Ian Weissman downgraded the rating on Pinnacle Entertainment PNK from Buy to Neutral, but raised the price target from $17.00 to $20.00. In the report, Weissman noted, “Although nothing in the fundamental story has dramatically changed, our rationale for today's downgrade includes: a high bar for positive commentary on this week's earnings call; and a modest level of uncertainty surrounding the merger with ASCA (which we describe herein). All this said, sell-side sentiment has gotten more positive on PNK over the past few weeks, so we certainly risk being outvoted by the majority here. In addition to a positive earnings surprise on Wednesday, the weaknesses in our thesis (as we see them) could include: REIT conversion chatter at some point after the merger is completed and leverage is reduced; multiple expansion, which, given high leverage, makes the implied equity value sensitive to any model changes; and our underestimation of the regional gaming recovery, along with (positive) impacts from PNK's new projects.” Pinnacle Entertainment closed on Friday at $19.38.