Morgan Stanley Rasies SunPower Price Target

In a note out Wednesday, Morgan Stanley analyst Timothy Radcliff increased his price target on SunPower Corporation SPWR to $45, maintaining an Overweight rating.

Radcliff feels a Joint YieldCo between SunPower and First Solar, Inc. FSLR would be better than a standalone SunPower company. First Solar and SunPower are in advanced talks to create a joint Yield Co, which would generate growth based on drop-downs from both companies. Although the structure is different than he expected, increased value capture from developed projects is his important takeaway.

Related Link: Why First Solar, SunPower YieldCo Is Like Coke And Pepsi Coming Together

Radcliff goes on to note, "Increasing PT to $45. We are transitioning our valuation framework to account for 100% probability that SunPower launches a Yield Co, and increasing our PT to $45. Although our framework does not yet reflect true economic split between the two, we believe our model does a reasonable job of capturing value.

"SunPower remains our top pick among solar developers, with more than 35% upside to our $45 PT from Tuesday's closing price of $33. In addition to the upside afforded by the joint Yield Co, we believe the company's differentiated technology will continue to differentiate SunPower's offering in the marketplace."