8Point3 Energy Is Fairly Valued In The Event Of A Sale, Says JPMorgan

8Point3 Energy Partners LP CAFD was initially founded as a joint venture yieldco between First Solar, Inc. FLSR and SunPower Corporation SPWR with the intention of buying solar assets from both entities and then paying up to 80 percent as a dividend. But now that First Solar is looking to sell its 28-percent stake in 8Point3 and SunPower is also looking to sell a 37-percent stake investors are left wondering what happens next. 

The Analyst

JPMorgan's Mark Strouse assumed coverage of 8Point3's stock with a Neutral rating and $16 price target versus the firm's prior coverage with an Overweight and $16 price target.

The Thesis

Three potential outcomes exist for the solar company in Strouse's view:

• A new sponsor acquires a majority stake (35 percent probability).
• 8Point3 is fully acquired (45 percent probability).
• No deal occurs (20 percent probability).

Nevertheless, the stock will remain a high-quality and low-risk choice for yield investors, the analyst said. 

"We believe there is a less than 50-percent chance that 8Point3 receives a new sponsor and remains an independent company, allowing shareholders to participate in future gains, while there is a greater than 50-percent chance that either 8Point3 is wholly acquired or a deal fails to materialize, in which case the stock seems appropriately valued," Strouse said. 

The case for further upside could be found in the event that a well-capitalized sponsor assumes a majority stake and the Street reacts with positive revisions to estimates, according to JPMorgan. 

Price Action

Shares of 8Point3 were trading lower by nearly 4 percent Tuesday afternoon. 

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