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UPDATE: Morgan Stanley Downgrades Penn National Gaming On Slow Trends & Multiple Risks

Erika Janowicz

In a report published Thursday, Morgan Stanley analyst Thomas Allen downgraded Penn National Gaming (NASDAQ: PENN) from Equal-Weight to Underweight and announced a $10.00 price target.

Allen expects regional gaming trend to remain weak due to consumer headwinds. He remarked that Penn National Gaming is the most exposed given high fixed rent payments. The analyst wrote that risks from slowing refund checks, ACA, cannibalization risk and the payroll tax lap will weigh on shares.

Morgan Stanley said, "We believe optimism has been mounting that we will see a positive inflection in regional gaming trends and that PENN will be the biggest beneficiary (two PENN upgrades YTD and buy/sell-skew of 10:1). However, we do not believe there will be a recovery as there are several factors that point to continued weakness through '15. We expect that as sentiment shifts more negative, investors will begin to focus more on out-year cannibalization risk rather than just upside from future developments."

Shares of Penn National Gaming closed at $10.80 on Wednesday. The stock trended lower in the morning, opening at $10.27 before its gradual ascent. Shortly after 10:50 a.m. EST, the company's CEO Timothy Wilmott bought 50,000 shares at $10.74 per share. The stock jumped to $10.52 after the announcement and continued a gradual climb to $11.45.

Shares are currently trading at $11.10, up 2.78 percent.

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