Vivint Solar Inc (NYSE:VSLR) shares are rising nearly 20% in Tuesday’s trading session, after Goldman Sachs analyst Brian K. Lee upgraded VSLR from Neutral to Buy and boosted his price target to $6.00 (from $3.50), to reflect an M&A component to his valuation. The new price target implies an upside of 15% from current levels.
Lee commented, “Fundamentally, we see VSLR’s renewed financing breadth ($200mn of announced tax equity funding since 1/17) and accelerating shift to cash/loan volumes strengthening the turn-around potential under the new CEO, as well as enhancing its appeal as a potential M&A target.”
“Given VSLR’s more aggressive push toward higher cash/loan mix and a more concentrated equity ownership structure (e.g. ~75% owned by PE/VC) than peers, we see the company’s position as potentially more conducive to a strategic transaction, in our view. Assuming this mix shift persists or is further accelerated by a potential buyer, our hypothetical sensitivity analysis suggests potentially mid-teens returns for a financial acquirer. This is in contrast to negative returns under a business as usual scenario and based on traditional financial metrics,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian K. Lee has a yearly average return of 1.7% and a 46% success rate. Lee has a -4.4% average return when recommending VSLR, and is ranked #2,184 out of 4,573 analysts.
Out of the 6 analysts polled by TipRanks (in the past 12 months), 2 rate Vivint Solar stock a Buy, 3 rate the stock a Hold and 1 recommends to Sell. With a downside potential of 16%, the stock’s consensus target price stands at $4.38.