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Barclays Likes Hannon Armstrong For Exposure To Alternative Energy, Initiates At Overweight

Barclays Likes Hannon Armstrong For Exposure To Alternative Energy, Initiates At Overweight

Barclays has started coverage of Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE: HASI) with an Overweight rating and price target of $27, implying a potential upside of 8.5 percent.

The brokerage's bullish stance is driven by core business growth and continued investor demand for low-risk exposure to the alternative energy space.

"We expect 9.8 percent pa growth in transaction volumes to drive 10.3 percent pa 2017–19E growth in core EPS," analyst Jon Windham wrote in a note.

Windham sees Hannon's investment portfolio growing from $1.4 billion in the second quarter of 2016 to $3.8 billion by the end of 2019. The company targets about 30 percent equity funding, which implies over $200 million–$250 million in equity raises annually.

Related Link: Solar Might Be In For An Even More Challenging 2017

The analyst also expects renewable and energy efficiency investments to grow by 9–12 percent pa between 2016–2020, given "declining renewable costs and government-supported efficiency policies."

"In our view, continued HASI equity offerings could spark a virtuous cycle in which a higher market capitalization and increased share liquidity drive a potential share re-rating, given a growing investor pool," Windham continued.

That said, Windham considers a key downside risk to the firm's bullish stance is Hannon's "exposure to changes in government support for renewable energy and energy efficiency." However, the analyst said key programs such as PACE and state RPS goals are likely to be maintained and enhanced as governments move to meet various climate change goals.

At time of writing, shares of Hannon were down 0.28 percent at $24.82.

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Latest Ratings for HASI

Nov 2018DowngradesBuyNeutral
Nov 2018MaintainsOverweightOverweight
Sep 2018MaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for HASI
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