Morgan Stanley Upgrades DryShips (DRYS)

Morgan Stanley is introducing a $5.50 price target on DryShips DRYS. A firmer tone in the ultra-deepwater drilling market recently may allow DRYS to scale down its risky and under-capitalized rig expansion. Morgan Stanley has increased its value estimate for DRYS's newbuild drillships to $600m. Morgan Stanley MS is upgrading DRYS to Equal-weight as well. MS sees extended dilution from the $350m ATM, which is still in progress. In addition, MS thinks the upside is limited by potential dilution from $700m in convertible notes and ~$300m in convertible preferred equity. DryShips is up 7% at $4.43