Goldman Sees Risk/Reward Balancing For TerraForm Global

Goldman Sachs’ Brian Lee believes TerraForm Global Inc GLBL has a more balanced risk/reward, given the increased probability of M&A.

Lee has upgraded the rating on the company from Sell to Neutral, while raising the price target from $1.50 and $3.25.

Preliminary Results

The analyst explained that the upgrade in the rating follows TerraForm Global’s “report of select preliminary 2H15/1Q16 financial metrics and updated disclosures around a sale process of the company.”

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Lee mentioned this represents the first step in financial clarity since the 3Q15 10-Q filing, while noting that the preliminary results announced were unaudited and subject to change.

The company announced it was undertaking the process for a potential sale of stakes in the company, including SunEdison’s B shares.

“While we take no view on the outcome of this process, we note change in control provisions would require lender consent, and exact timing of the process is uncertain,” Lee stated.

Better Than Expected CAFD

The analyst pointed out that the preliminary results reflected better than anticipated CAFD, with the other headline metrics coming in within 10 percent of the estimates.

“We note higher CAFD appears to have been driven by one-time items as well as a $40mn interest support payment from SunEdison that we had previously cut from our model,” Lee stated.

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