Morgan Stanley Adds NRG Yield To 'Best Ideas' List

In a report published Monday, Morgan Stanley analysts maintained an Overweight rating on

, with a price target of $32, following the recent decline in the company's share price. NRG Yield's shares have plunged almost 4 percent so far this month, as compared to an average rise of about 5 percent in peer Yieldcos. This divergence has not been driven by any fundamental business changes. "Confusion about the recent recap has in our view driven the weakness in NYLD shares," the analysts said. In the report Morgan Stanley explained the recap saying, "NYLD effectively split into two stock classes: A and C. Every investor received 1 A share and 1 C share for every NYLD share owned pre-recap, with the C shares having 1/100 the vote of the A shares. This note is referencing class C shares (which trade as NYLD)." As the company continues to grow, it will issue C shares for funding. This will result in

, which has a stake of about 55 percent in NRG Yield will retain voting control of the latter. The analysts commented, "The fundamentals of NYLD, which are driven by the growth in US renewables, remain robust in our view, driving our projected 17% 2015-2019 dividend CAGR. We believe NYLD will benefit from NRG's strong energy marketing platform and focus on renewables growth, and our projections do not yet include growth from distributed solar, which we view as increasingly likely to be large and profitable." The analysts recommended to buy NRG Yield shares on the current weakness due to the recap confusion, while adding the stock to their Best Ideas List.