We Strongly Recommend Buying SunEdison Shares, Says Axiom Capital; Suggests $31-$35 Fair Value
Axiom Capital analyst Gordon Johnson was out today with some bullish comments on SunEdison, Inc. (SUNE), defining the stock’s 12-month fair value at $31-$35, and recommending buying the shares at current levels.
Johnson commented: “After our review of SUNE’s pending 61.94%-owned (we assume the greenshoe is exercised) YieldCo’s S1, we believe the company’s shares are ultimately worth $31-$35/shr, or 40.8% upside (at the midpoint) from yesterday’s closing price. While we understand the stock has been a high-flyer more recently, after our review of: (a.) TERP’s extensive 471-page S1 document, (b.) the yields the market is currently ascribing to existing YieldCos, as well as master-limited-partnership (MLP) structures, underpinning an elevated thirst for attractive/stable returns with the attached promise of high future dividend growth, (c.) a lack of traditional investors – due to what we believe is a lack of understanding how to value TERP as well as SUNE’s current arbitrage opportunity in the market, (d.) the differences between YieldCos and MLPs, as well as SUNE’s hybrid DevCo and YieldCo optionality (meaning the company is not a pure-play on YieldCos or DevCos), and (e.) our proprietary top-down SUNE valuation model, we believe as more traditional investors become better acquainted with how to value SUNE, significant value will accrete to the stock. After our extensive review of SUNE, TERP’s S1, the history of MLPs, and the history of YieldCos, particularly during periods when the Treasury curve is inverting to zero, we would be strong buyers of SUNE at today’s share price as we see roughly 68.5% upside in the stock over the next 6-12 months”.
According to TipRanks.com, which measures analysts and bloggers success rate based on how their calls perform, analyst Gordon Johnson currently has a one-year average return of 0.0% and a 48% success rate. Johnson is ranked #2392 out of 3215 analysts.