UPDATE: Bank of America Reiterates Underperform Rating, Raises PT on ITT Educational Services as Shares Surge but Risks Remain

In a report published Monday, Bank of America analyst Sara Gubins reiterated an Underperform rating on ITT Educational Services ESI, and raised the price target from $7.00 to $8.00. In the report, Bank of America noted, “ESI shares rallied 131% over the past two trading days as investors are assigning lower going concern risk. ESI had $207mn in cash at 3Q14-end. It expects roughly $190mn in cash at year-end, after making $60-70mn in PEAKS related payments. After incorporating $90mn for the letter of credit, this leaves ~$100mn in unrestricted cash. This should be enough to largely mitigate liquidity concerns, in our view. We are lowering estimates on higher interest expense for consolidating PEAKS on balance sheet. We have kept revenue and margin assumptions largely unchanged.” ITT Educational Services closed on Friday at $9.19.