Deutsche Bank Upgrades Vivint Solar To Buy, PT $7.50

Shares of Vivint Solar Inc

surged 14 percent after Deustche Bank upgraded the stock to Buy from Hold, saying that its power co valuation exercise suggests considerable upside for VSLR. The brokerage also raised its price target on the stock to $7.50 from $3.50. The new price target of $7.50 implies an upside of 185 percent from Thursday's close. "With the tax equity environment for VSLR improving, we believe the company remains in a strong position to achieve its 2016 installation targets. Additionally, after a slow seasonal start, fundamentals in the US resi market are improving," analyst Vishal Shah wrote in a note. Shah said VSLR has 514MW of operating assets in the current portfolio which he believes are worth about $5/share (assuming 8 percent discount rate). This implies that at current levels, shares are assuming the devco is worth ($2.50)/share. "Even if we do not include renewals, VSLR's operating assets are worth ~$3.50/share which would mean ~($0.90) value for devco," Shah noted. The analyst highlighted that the most recent tax equity round enables the company sufficient tax equity funds through Aug ‘16 timeframe. Shah said company needs $2.60-2.80/W of project financing of which $1.50-1.70/W is in the form of tax equity financing. The analyst noted that additional financing announcements are likely as the company had said it was working on $200 million worth of tax equity transactions. "We believe the amount of capital needed to achieve 2016 objectives is easily achievable and more importantly, the shares are clearly not discounting this amount of capital raise at current valuation levels," Shah added. At the time of writing, shares of Vivint Solar climbed 11.41 percent to $2.93.