Brean Capital Upgrades SunEdison

Brean Capital upgraded SunEdison Inc SUNE from Hold to Buy with a $23 price target.

Analyst Michael Gaugler noted that although “SUNE's 3Q14 results were mixed, we believe accelerating cash available for distribution (CAFD) at SUNE's yieldco, TerraForm Power will drive TERP shares higher, increasing the value of SUNE's ownership stake and its own share price.

“We recommend investors begin accumulating positions, as we believe TERP's CAFD guidance increase announcement made yesterday with the release of its 3Q14 results will have a positive impact on both share prices.”

“3Q14 results aside, we noted from last night's press release that MWs retained on the balance sheet in terms of 2014 guidance has increased slightly, while solar energy system sales volumes were guided slightly lower. This could be the result of an accelerated time frame for the planned emerging markets yieldco (a positive), but could push 4Q14 consensus forecasts lower (a negative),” according to Gaugler.

Gaugler derived the “$23 target price based on a SOTP valuation (TERP/SEMI ownership stakes, and the SUNE stub). We break down the value as follows: SEMI/$1.60 - TERP/$9.13 - SUNE Stub/ $11.74 (based on 5x our 2016 EBITDA forecast of $621MM).”

SunEdison closed at $18.36, down 2.75 percent.