UPDATE: UBS Downgrades Calpine Corporation (CPN) to Neutral
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(Updated - November 2, 2016 8:34 AM EDT)
UBS downgraded Calpine Corporation (NYSE: CPN) from Buy to Neutral with a price target of $13 (prior $15). Last week the company reported Q3 results.
"We lower FY18E and FY19E EBITDA by ~$70 Mn and ~$100 Mn, respectively, to more fully align with the implied guidance mgmt. provided during the call. With consensus 2018E EBITDA at $2.05 Bn and mgmt guiding implicitly for $1.975 Bn at the midpoint of its range (+$100 Mn YoY), we see risk for further compression of estimates. While admittedly shares have been under pressure the risk of further negative revisions coupled with more challenging valuation roll forward into 2019 and 2020 off a 2018 SOP estimate pushes us to the sideline for now. We emphasize that we believe the FCF still provides meaningful strategic flexibility, but valuation at ~7x EBITDA, consistent with peers, yields just $13 including $3/sh of balance sheet NOL value and a further ~$1/sh of asset value for 'merchant' plants against which little FCF is generated," said analyst Julien Dumoulin-Smith.
Shares of Calpine Corporation closed at $11.80 yesterday.
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