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UBS Cuts Sunedison's Target To $0.75 As Execution Concerns Are Starting To Materialize

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UBS Cuts Sunedison's Target To $0.75 As Execution Concerns Are Starting To Materialize
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Sunedison Inc (NYSE: SUNE) is up more than 3.6 percent on Wednesday, but that didn't prevent UBS from releasing a mid-day update on the struggling solar company. The firm, which has a Sell rating on the stock, cut its price target from $2.00 to $0.75 as execution concerns have started to materialize.

"The termination adds to the concerns that SUNE will not be able to continue developing projects," UBS said, "with PPA counterparties and lenders clearly more skeptical of entering into agreements with the company at present. We have clear doubts that SUNE will be able to hit the utility-scale and residential development targets for 2016, and we expect mgmt. to lower expectations in the near future."

The stock traded recently at $1.68 -- it was trading in the lower $30s back in July.

Related Link: Fears That Sunedison Missed A Preferred Dividend Aren't 'Material,' Avondale's Morosi Says

'Expect Volatility'

UBS continued, "Adding further complexity to the story is the fact that the project in question is included in a portfolio that was sold to a group of investors (DE Shaw, Madison Dearborn Capital Partners IV LP, and Northwestern University) on 12/29, in exchange for the extinguishment of ~$336Mn in notes due 2020... The deal had contemplated $336Mn ($121.5Mn TERP shares and $215Mn cash)."

The firm said it's not clear how management will replace these assets and it's now a waiting game on the Injunction outcome.

"Relative to the current Appaloosa lawsuit for an injunction on the pending VSLR deal, the judge did not yet file a decision, with timing unclear. The full hearing is scheduled for Feb 25th, the day after the VSLR shareholder vote – and most probably the same day as the VSLR deal would likely close without an injunction," the firm said.

Back on January 15, Axiom's Gordon Johnson told Benzinga that, "Given the number of deals and the type of deals that [Sunedison has] done...if they're unable to sell those projects, I don't know how much longer the equity can last." He questioned Sunedison's ability to make it to the end of the year.

Latest Ratings for SUNE

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

View More Analyst Ratings for SUNE
View the Latest Analyst Ratings

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