Goldman Sachs Upgrades DryShips (DRYS) to Buy

Goldman Sachs upgraded DryShips (NASDAQ: DRYS) from Neutral to Buy and raises their price target from $5.50 to $6.00 based on sum-of-the-parts framework.

The firm cited: "(1)an attractive valuation, based on our sum-of-the-parts and scenario analyses that highlight significant upside, as we think re-investment risk fears are overdone; (2) a likely underestimated drillship business, given an analysis of the top 330 oil and natural gas projects that points to a 38%, three-year CAGR in ultra deepwater drill ship demand while spare capacity remains constrained; and (3) sufficient liquidity, as the contracted fleet is fully funded while loan to value covenants present a manageable risk."

Despite the upgrade, Goldman lowered 2011E/2012E/2013E EBITDA to $747/$856/$874 mn from $753/$915/$925 mn.

For more ratings news on DryShips click here and for the rating history of DryShips click here.

Shares of DryShips closed at $3.83 yesterday.

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