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Credit Suisse Defends Sunedison, Says Sell-Off On Margins Is Unwarranted


Shares of Sunedison Inc (NYSE: SUNE) were down more than 25 percent on Thursday, after the company missed earnings estimates on the back of lower-than-expected third-party sales and a higher mix of retained projects.

For the second quarter of 2015, the company reported a net loss of ($0.67) per share on revenue of $455 million, while the Street was expecting a consensus net loss of ($0.45) per share on sales of $403.77 million.

Despite the miss, Credit Suisse analysts Patrick Jobin, Maheep Mandloi and Jennifer Ky reiterated an Outperform rating and $45.00 price target following the earnings call. They argue there is “a fundamental disconnect between the stock performance and the (…) stellar execution of the organic project development business that exceeded expectations on all metrics, (…) increased disclosure to pacify liquidity concerns, and the company making the (right) decision to ensure accretive drop-down economics.”

In fact, the analysts note, the drop in the stock price provides investors with a buying opportunity, even in spite of the vast volatility.

The Issue Causing Consternation

According to the note, investors are somehow frustrated with TerraForm Power Inc (NASDAQ: TERP) not having raised its 2016 guidance, and with Sunedison having demonstrated it could still drop down assets at highly attractive levered yields (below 10 percent) to TerraForm, “by dialing back the cash contribution (i.e. gross margin) at SUNE's DevCo.” However, the analysts note that subsidizing drop economics calls TerraForm’s cash generation into question, even in spite of a higher GP value.

Latest Ratings for SUNE

Mar 2016Stifel NicolausTerminatesHold
Mar 2016Axiom CapitalMaintainsSell
Mar 2016Avondale PartnersDowngradesMarket OutperformMarket Perform

View More Analyst Ratings for SUNE
View the Latest Analyst Ratings


Related Articles (SUNE + TERP)

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Posted-In: Credit Suisse Jennifer Ky Maheep Mandloi Patrick JobinAnalyst Color Price Target Reiteration Analyst Ratings

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