UPDATE: Morgan Stanley Downgrades Melco Crown Entertainment

In a note released Wednesday morning, Morgan Stanley analysts downgraded shares of Melco Crown Entertainment MPEL from Overweight to Equal-weight and cut the price target from $43 to $36.

The Good
The team over at Morgan Stanley believes Melco could have a better second quarter than its peers based on the run-rate in April and May. Furthermore, the team says Melco could see sequential improvements in the third quarter as the renovation of a premium mass area comes to a close.

Additionally, the team noted that Melco is the only gaming operator seeking growth outside of Macau and is scheduled to open City of Dreams Manila in the fourth quarter of 2014.

The Bad
According to the team, Melco's mass win per table fell nine percent in the first quarter and was surpassed for the first time.

As Melco moves to open more locations in the Philippines, the analysts at Morgan Stanley are worried this might open up the risk of mass market cannibalization. This would mean growth would be driven primarily by the VIP market, which the team views as "volatile and uncertain."

Additionally, the team noted that Melco is trading above the Macau P/E multiple average and increased its construction capital expenditures by $300 million.