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A YieldCo is The 'Best Strategy' For First Solar And SunPower, Deutsche Bank Explains

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In a report published Monday evening, Deutsche Bank analyst Vishal Shah commented on First Solar, Inc. (NASDAQ: FSLR) and SunPower Corporation's (NASDAQ: SPWR) announcement that they are in advanced talks to form a joint YieldCo.

Shah noted that a joint YieldCo decision is "probably the best strategy" for both companies. A potential YieldCo could end up being "one of the best growth stories out there," while also offering the entity strong development capability in utility scale and commercial markets.

"This announcement, although expected, is a significant positive in our view," Shah wrote. "While SunPower had discussed plans to announce a YieldCo by early this year during their Analyst day, shares were clearly not discounting any upside potential from this YieldCo."

Shah also added that the announcement "mitigates" a lot of concerns related to the size, timing and structure of the YieldCo and that, most importantly, both companies have sufficient unsold projects that can be added into the YieldCo.

Finally, the analyst argued that First Solar has a strong balance sheet and SunPower has the backing from TOTAL, which should help solve financing problems.

Shares of First Solar were upgraded to Buy from Hold, and have a price target raised to $68 from a previous $60.

Shares of SunPower remain Buy rated with an unchanged $43 price target.

Latest Ratings for FSLR

DateFirmActionFromTo
May 2017JMP SecuritiesUpgradesMarket PerformMarket Outperform
May 2017BairdDowngradesOutperformNeutral
May 2017Bank of AmericaUpgradesUnderperformNeutral

View More Analyst Ratings for FSLR
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Posted-In: Deutsche Bank Solar Power Vishal Shah YieldCoAnalyst Color Price Target Analyst Ratings

 

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