The Tail is Wagging the SunEdison (SUNE) Dog - Analyst
Credit Suisse analyst Patrick Jobin weighed in on SunEdison (NYSE: SUNE) with shares plummeting 20% today. Jobin believes weakness in SUNE is related to TerraForm Global (NASDAQ: GLBL) and TerraForm Power (NASDAQ: TERP).
According to Jobin, TERP/GLBL are trading lower likely due to (1) a lack of providing any guidance, even any 2016 color for ~$1.82 DPS, which TERP used to communicate as a no-equity raise achievable level, despite improvements in liquidity outlook and solid quarterly execution on CAFD and declared DPS, (2) the changed strategy for TERP to now invest in warehouses with subordinated equity - $388m of likely subordinated co-investment to fund the Invenergy purchase, and (3) comments on inorganic acquisition landscape being robust, likely further exacerbating fears of more third-party acquisitions requiring capital.
In addition, investors are confused around SUNE's declining pipeline, despite the coverage that extends ~3+ years already and the company's sensible deliberate decision to emphasize profits over volumes.
Lastly, based on investor questions thus far this morning, there was more hope of announcing a restructuring of the pending VSLR acquisition than they appreciated along with considerable confusion on gross margins for project sales. However, they see little reason for concern or disappointment.
On the quarter, the analyst said it was "strong", beating the firm's volume and margin forecasts. Additionally, the company reiterated both volume and cash generation guidance for 2016 while also providing additional disclosure around warehouse structuring.
The analyst has an Outperform rating and price target of $25 on SUNE.
For an analyst ratings summary and ratings history on SunEdison click here. For more ratings news on SunEdison click here.
Shares of SunEdison closed at $7.40 yesterday.