Today - Thursday, April 17, 2014
- After initially trading near breakeven following a Baird upgrade to Outperform, SolarCity (SCTY +1.7%) has moved higher.
- Baird's Ben Kallo thinks the 35% drop seen since Feb. 27 provides a great buying opportunity for "the stock most levered to the U.S. rooftop market, which will likely undergo a boom over the next several years."
- He also argues SolarCity's cost cuts and scale give it a competitive edge, and that solar asset-backed notes provide it with cheap capital to "capitalize on the expansive U.S. greenfield opportunity."
- Deutsche and Roth talked up the value of SolarCity's asset securitization efforts two weeks ago. Shares rallied yesterday on news of the DOE's loan guarantee proposal.
- Kinder Morgan Partners (KMP -0.8%) is reiterated with an Underweight rating and $82 price target at Morgan Stanley, which says it can't see KMP outperforming peers on distribution growth that is below the industry average.
- Acknowledging KMP's cash flow stability from quality pipeline assets and geographic diversity, the firm sees accretion via projects and acquisitions as limited by a large asset base and a high general partner cash incentive share (45%-plus) which caps distribution growth upside.
- The firm says KMP's oil production business (15%-20% of cash flow) creates material future asset/reserve replacement risk, and dropdowns from KMI (into KMP and EPB) likely will be finished by 2014, creating the need to continue to develop new organic projects.
- KMI +1.2%, KMR +0.5%, EPB +2.2%.
- Deutsche Bank analysts raise their price targets on top oil service stocks (OIH), seeing increasing strength in a North American cyclical recovery with current forward earnings estimates perhaps proving to be conservative.
- Basic Energy Services (BAS) gets a big price boost to $43 from $18, citing a recent activity update that indicated utilization levels had increased across all the company’s business segments.
- Other top stocks rated Buy at the firm, including those whose price objectives have been raised: BHI, EXH, HAL, PTEN, PES, SLB.
- Cloud Peak Energy (CLD -1.5%) is "a good stock in a dirty business," Barron's says in making the case for a potential 30% upside in what it sees as undervalued shares, but CLD isn't enjoying the usual Barron's bounce.
- CLD trades at a discount to its larger peers despite its clean balance sheet and improving free cash flow profile, and a rise in thermal coal prices could have a dramatic impact on profits and the stock; every $1/ton increase in the Powder River spot price adds ~$46M to CLD's EBITDA.
- Most other coal names also are lower: BTU -1.5%, CNX -0.3%, ACI +0.2%, ANR -1.3%, WLT -2.1%, WLB -0.1%.
- JPMorgan's Philip Cusick has upgraded Gogo (GOGO +3.1%) to Overweight, and set a $28 PT.
- Cusick calls the in-flight Wi-Fi provider's recent selloff "macro or sentiment-driven," believes its business aviation ops are worth $11/share alone, and sees plenty of U.S. and international opportunities as Gogo "accelerates the pace of RFPs."
- The upgrade follows deals with Boeing and Air Canada, and the unveiling of Gogo's high-capacity 2Ku satellite connectivity platform.
- Alcoa (AA +0.8%) is upgraded to Sector Perform from Underperform with a $15 price target, up from $12, at RBC, based on the recent stronger than expected performance in the alumina and global rolled products businesses.
- The firm admits that it had underestimated the upside potential for the shares and now sees lower downside risk than before, but it believes much of the business improvement and near-term growth likely is reflected in the share price.
- Adam Gefvert expects You On Demand (YOD) to trade at $1.50 by the end of 2014, and $0.50 by the end of 2015.
- He points out YOD only had ~$300K in 2013 revenue in spite of potentially reaching 18.2M Chinese households as of 2012, and that even a 3x 2014 revenue increase would leave shares trading at over 120x sales.
- Gefvert also notes the Chinese VOD service provider has to contend with the huge popularity of pirated content, and (given Q4 SG&A spend of $8.3M) declares management is "fleecing shareholders."
- With a large number of outstanding warrants and preferred shares having sub-$2 conversion prices, Gefvert thinks YOD could fall below $2 if holders
"get worried and convert and sell their stock before it falls any closer to the exercise price."