UPDATE: Deutsche Bank Upgrades Calpine

Deutsche Bank upgraded Calpine Corporation (NYSE: CPN) Wednesday from Hold to Buy and raised its price target from $25 to $31.

Analysts led by Jonathan Arnold thought “CPN’s presence in the East, Texas and West provides geographic diversity and its exclusive reliance on natural gas as an input fuel cost, suggests that if natural gas falls further and pulls down power prices with it, CPN would be a relative winner in that environment, justifying its peer group 0.5x multiple premium.”

Arnold added, “CPN also possess a hidden gem in our view - the Geysers, a 725 MW renewable energy asset in California.”

The analysts expected “CPN will continue to maintain a disciplined investment focus, as recently highlighted by placing a hold on a potential Texas expansion. It will instead use its substantial cash flow generation to buy back shares, supporting substantial FCF/Share growth.”

Calpine recently traded at $21.18, up 5.27 percent.