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(Updated - September 27, 2016 8:08 AM EDT)
UBS initiated coverage on Pattern Energy Group (NASDAQ: PEGI) with a Neutral rating and a price target of $24. Analyst Julien Dumoulin-Smith is cautious due to the exhausting ROFO pipeline and the fact that the stock has already rallied 30% from the first quarter.
"We are launching coverage of PEGI with a Neutral rating and $24 PT, seeing shares as only trading at a modest premium to our DCF target of $20 and discount to our Yieldbased methodology of $28. While shares only trade at a modest premium to DCF value (7.3% discount rate), similar to NYLD, we emphasize this discount is appropriate as long as PEGI has a separate parent private equity sponsor. Further, we see the greater volatility associated with a largely wind portfolio and financial swaps (rather than PPAs) on some deals, we appreciate the greater financial risk vs. peers," said Dumoulin-Smith.
Shares of Pattern Energy Group closed at $23.34 yesterday.
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