Macquarie Upgrades Hercules Technology, Likes Dividend

In a report published Tuesday, Macquarie analysts upgraded the rating on

, with a price target of $14. The analysts believe that the company's dividend is sustainable and that the competitive environment is likely to moderate. Although the 1Q15 EPS came in well below the quarterly dividend, the analysts expect spill over income and unrealized gains from the investment in

to mitigate the risk of dividend cuts. In addition, the announced acquisition agreements of several of the company's peers is likely to bring in mediation in competition and help Hercules Technology achieve its targeted loan growth of 30-50 percent in 2015. "The potential for an increase in the SBA program lending limit to $350 million (from $225 million) in 2H:15 could provide origination flexibility in early 2016 for HTGC," the analysts said. The EPS estimates for 2015, 2016 and 2017 have been lowered "to reflect additional costs tied to the build out of HTGC's platform and a slower ramp in fee income," the analysts added.