Goldman Sachs Removes Calpine Corporation (CPN) from Conviction Buy List

Goldman Sachs downgraded Calpine Corporation (NYSE: CPN) from Conviction Buy to Buy with a price target of $23.00 (from $25.00). Analyst Michael Lapides sees 3% downside to FY15 EBITDA estimates and he thinks Calpine may guide to the lower end of its EBITDA range.

"On our 12-month view we remain positive on CPN given long term trends and its 12-month total return potential, but given our slightly-lowered quarterly EBITDA estimates are now below consensus we see increased volatility potential over the next two quarters. We still see significant FCF in 2016/2017, despite our lower forecasts with CPN trading at a 9%/15% FCF yield on our 2016/2017 estimates, well above peers," said Lapides.

"We lower our EBITDA estimates by 2%-4% on (1) lower spreads in markets like New England, offset partially by higher volumes in Texas, (2) lower spring/summer 2015 pricing, (3) slightly lower margins in California, despite weak hydro conditions that should benefit gas generators like CPN, and (4) slightly higher operating costs. We lower our EV/EBITDA-based 12-month target price by $2 to $23, implying 32% total return potential," added the analyst.

For an analyst ratings summary and ratings history on Calpine Corporation click here. For more ratings news on Calpine Corporation click here.

Shares of Calpine Corporation closed at $17.30 yesterday.

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