Sunedison, one of the largest renewable energy companies worldwide rebounded today after experiencing an 18% decline yesterday. The company’s stock is trading at $9.24 per share, up by more than 5% at the time of this writing around 12:26 PM in New York.
Over the past 52 weeks, the stock price of Sunedison declined from its highest trading price of $33.45 per share to $8.10 per share. The company lost more than 52% in stock value year-to-date, hurting many hedge funds.
Sunedison stock rating downgraded to Neutral
Yesterday, UBS analyst Julien Dumoulin-Smith and his colleagues downgraded their rating on the shares of Sunedison to Neutral from Buy. They also lowered their 12-month price target on the stock from $20 to $11 per share.
In their report, the analysts emphasized, “We cannot recommend investors attempt to catch a falling knife in this risk-off market environment.”
They noted that the management of Sunedison does not have clears answers to the many questions of investors, and there is no catalyst to reverse its downward trend. Dumoulin-Smith and his fellow analysts do not expect any near-term relief for the company.
They believed that Sunedison still has fundamental value if it can achieve its stated targets (back to the $30s). However, they think the company’s outlook will become worse before its get better given the fact that many investors are losing confidence.
Sunedison recently implemented strategies (Dominion deal, preferred stock, and warehouse) to improve its balance sheet. Its management also confirmed its ability to achieve TERP’s 2016 DPS, an indication that the IDRs are still attainable. However, the analysts doubted its sustainability and growth beyond that point. According to them, “With respect ti TERP’s value creation; we see a fundamental challenge in securing deals with IRRs…”
Analysts prefer Terraform Power than Sunedison
On the other hand, Dumoulin-Smith and his colleagues said they prefer the shares of TerraForm Power than Sunedison citing the reason that it has a more favorable risk-reward associated with the Yieldco.
The analysts recommended a Buy rating on the shares of TerraForm Power with a $30 price target. The analysts believe that TerraForm Power is significantly less complex, and they feel more confident on its diversified portfolio.
The shares of Terraform Power increased more than 4% to $21.07 per share at the time of this writing.