Susquehanna upgraded Advanced Energy Industries (NASDAQ: AEIS) from Neutral to Positive with a price target of $35.00 (from $22.00), saying execution and restructuring leading to higher earnings power.

Analyst Mehdi Hosseini commented, "We are upgrading AEIS from a Neutral to Positive rating as we introduce our CY16/CY17 (ex. Solar Inverter) earning estimates of $2.60/$2.65. Our price target has also increased from $22 to $35, or 12x CY16 EPS plus net cash. Our upgrade is based on: (1) continued execution in divesting (the money-losing) Solar Inverter business, (2) diversifying into Industrial and scaling the Services business, and (3) increasing TAM as 3D NAND capacity adds takes off (albeit at a moderate pace), enabling AE (via its exposure to Etch/ALD) to increase WFE TAM from 0.4% in 2012 to 1% today. We also highlight increased emphasis on FCF generation; net cash currently accounts for 13% of MC and we estimate the company to drive FCF margin of at least 20% per year over the next few years given the leaner business model. This compares to FCF margin of 10% in 2014 and 5% in 2013. Some of this cash could be used for accretive acquisitions, particularly in the Industrial segment."

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Shares of Advanced Energy Industries closed at $24.95 yesterday.