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Tepper Not Only Reason For TerraForm Price Explosion: This Analyst Upgraded Stock Night Before

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Tepper Not Only Reason For TerraForm Price Explosion: This Analyst Upgraded Stock Night Before
  • Shares of TerraForm Power Inc (NASDAQ: TERP) gained more than 20 percent on Tuesday.
  • Investors and traders attributed the surge in the stock to notable hedge fund manager David Tepper's letter to management.
  • Perhaps flying under the radar, Colin Rusch of Oppenheimer upgraded shares of TerraForm on Monday to Outperform with a $10 price target.

Hedge fund manager and investor David Tepper delivered a letter to the company's sponsor, Sunedison Inc (NYSE: SUNE).

Tepper is a major player in the hedge fund sphere and when he publicly discusses a holding investors and traders listen closely and react accordingly. However, Colin Rusch of Oppenheimer may have also contributed to the bullish sentiment as he upgraded TerraForm's stock rating to Outperform (from a previous no rating) with a $10 price target.

According to Rusch, TerraForm's stock is trading "well below" the intrinsic value of its asset portfolio and the risk to reward profile is "substantially weighted" to the upside.

See Also: David Tepper: SunEdison Is Holding Back TerraForm's Value

"With acquisition resources limited due to the Invenergy and VSLR deals (which we expect to close), we believe the run-off scenario provides an appropriate base case for investing in the stock," Rusch wrote. "We believe the most recent leg down on shares after management changes is overdone and offers a compelling entry point on shares."

Rusch continued that TerraForm's cash flows are indeed investment-grade and should trade in-line with similar assets. In fact, at a 5 percent discount rate, the value of TerraForm's shares would be $13; however, a 10 percent discount rate in the analyst's calculations is more appropriate to "account for uncertainty around terms on TerraForm's liquidity resources and governance risk."

Finally, Rusch stated that recent management changes at TerraForm are "still looming" but investor concern is "overdone."

Bottom line, TerraForm remains a "strategic asset" to SunEdison and the company will accrue sufficient cash from its operations to repay all of its outstanding debt.

Latest Ratings for TERP

DateFirmActionFromTo
Apr 2020BarclaysMaintainsEqual-Weight
Mar 2020JP MorganMaintainsNeutral
Mar 2020JP MorganMaintainsNeutral

View More Analyst Ratings for TERP
View the Latest Analyst Ratings

 

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