8Point3 IPO 'Priced To Perfection,' UBS Says

In a report published Monday, UBS analyst Julien Dumoulin-Smith initiated coverage of 8Point3 Energy Partners LP CAFD with a Neutral rating and price target of $21. The analyst believes that the company's IPO was "priced to perfection" and that the stock offers a competitive yield. Although the analyst views the company as one of the "best in breed," for now the stock warrants a marginal discount to some of its peers, given 8Point3 Energy's "modestly lower growth rate, solar-only asset base, and less detailed long-term asset visibility." Despite the company's yield, above average growth and "Sponsors development opportunities," the analyst believes that the stock deserves to trade at a discount to its higher growth peers. The stock could trade more in-line with such peers if the management provides greater clarity on 8Point3 Energy's development platform and "latitude." "Having two sponsors both independently originating projects for the YieldCo is a positive for CAFD," Dumoulin-Smith said, adding that the combined market cap of its sponsors indicates "no lack of development resources to support CAFD in the future." According to the UBS report, "The downside of divided ownership relates to questions about split/rotating management and longer term incentives. Moreover, given the split ownership and the slower growth rate implied GP value will be modest, with high-splits only achieved by ~2020."