UPDATE: Bank of America Upgrades Linn Co. on Attractive Entry Point, Discounted Risk

In a report published Monday, Bank of America analyst Abhishek Sinha upgraded the rating on Linn Co. LNCO from Neutral to Buy, but lowered the price target from $43.00 to $32.00.

In the report, Bank of America noted, “We are upgrading LinnCo (LNCO) to Buy with a $32 price objective US based on our estimate of fair value for LINE plus a 5% premium, broadly consistent with its current relative value vs LINE. Recently LINE issued a press release voluntarily disclosing an informal inquiry by the SEC, and specifically 'a private, non-public inquiry which includes its use of non-GAAP financial measures, hedging strategy and LNCO's proposed merger with Berry Petroleum (BRY). Our review of the financial outlook for LINE leads us to conclude the outlook and sustainability of LINE/ LNCO's cash distributions should not carry a materially higher risk implied by the recent collapse in the unit price. Although the SEC stated the inquiry does not imply a negative view of LINE or LNCO, it is a significant overhang on the pending merger with BRY. However, we believe the risk is being appropriately reflected by an inflated yield and the recent sharp fall in the share price.”

Linn Co. closed on Friday at $26.64.