Vivint Solar shares shoot up over 38% through regular trading today after a research firm raises its rating on the stock
Deutsche Bank analyst Vishal Shah has raised his rating on Vivint Solar Inc. (NYSE:VSLR) from Hold to Buy, and has also raised his price target on the stock from $3.5 to $7.5 today. Subsequently, shares rose 40.04% to $3.69 as of 1:38 PM EDT today. Based on the last closing price of the stock, Mr. Shah’s raised price target reflects 185.17% upside potential for the stock.
For Vivint Solar and Sunrun Inc., the analyst said that both the stocks currently trade at discounts based on their operating assets’ valuations. “With the tax equity environment for VSLR improving, we believe the company remains in a strong position to achieve its 2016 installation targets,” said Mr. Shah. The analyst further added that the US residential market is seeing improved fundamentals after “a slow seasonal start.”
As for SolarCity Corp. (NASDAQ:SCTY), the analyst cut his price target from $49 to $32, based on his opinion that the stock is likely to continue declining in the near term owing to the company’s hefty capital needs in order to meet its 2016 operating objective. Following these comments, SolarCity shares slumped 4.00% to $22.78 as of 1:56 PM EDT Friday. However, in the long term, the analyst says shares would rise.
Mr. Shah said that he estimates Vivint Solar’s powerco assets at $5 per share, based on an 8% discount rate. On the other hand, he values Sunrun’s operating assets at $7 a share (assuming the same discount rate). Excluding renewals, the analyst says Vivint’s powerco assets would have a value of $3.5 per share, and Sunrun’s assets would be worth $4 a share.
As mentioned on Thomson Reuters, of the five analysts covering Vivint Solar, one maintains a Strong Buy, two maintain a Hold, while the rest have an Underperform rating on the stock. The Street currently has a $4.15 12-month mean price target on the stock, reflecting 57.79% upside potential based on the stock’s last close of $2.63.