ROTH Capital: Keep Buying 8Point3

Shares of 8Point3 Energy are down 41.7 percent from their opening share price following the solar company’s summer IPO back in June. However, ROTH Capital Partners maintains its positive outlook for the stock. In a new report, analyst Philip Shen explained why he believes traders should be buying the dip.

Liquidity Concerns

Shen believes the majority of the selling pressure has been due to investors’ growing concerns over the company’s liquidity and its ability to maintain distributions without issuing equity. According to Shen, 8Point3’s recent better-than-expected guidance indicates that liquidity should not be a concern at least through the first half of 2016.

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Portfolio

With liquidity not an immediate concern, Shen explained that investors should be focused on the company’s attractive 8 percent distribution yield and its world-class asset base. “The initial portfolio is on track to be completed by YE’15, and we continue to believe 8Point3 has one of the best asset portfolios/pipelines in the space,” he wrote.

The Numbers

Fiscal Q3 numbers came in fairly soft versus consensus expectations. The company reported only $3 million in revenue versus expectations of $6 million. However, gross margins of 95.7 percent topped consensus estimates of just 67.6 percent.

ROTH has now lowered its 2015 revenue forecast to $13.2 million, but raised its EPS estimate for the year from -$0.19 to -$0.08 on the strength of the company’s surprising margins.

Outlook

Shen believes that the recent market turmoil has sent 8Point3’s share price down to a valuation level that offers compelling upside for buyers. ROTH has lowered its price target for the stock from $21 to $18, but maintains its Buy rating.