Atlantica upgraded at RBC on potential Algonquin Power stake sale

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Atlantica Sustainable Infrastructure (NASDAQ:AY) +7.2% in Tuesday's training after RBC Capital upgraded shares to Outperform from Sector Perform with a $34 price target, seeing a potential sale of Algonquin Power's (NYSE:AQN) stake in Atlantica as a catalyst.

Atlantica's (AY) current share price is attractive, RBC analyst Shelby Tucker said, reflecting a 2023 CAFD yield of 8% as he expects the renewable energy company to gradually grow CAFD/share as it targets $300M/year of equity investment.

Although Algonquin Power (AQN) has not discussed it, Tucker sees the company as possibly divesting its entire 43% stake; a sale of the entire stake to one party, potentially leading to a long-term investor and/or new sponsor, or a sales process that prompts a take-private transaction, requiring a takeout premium, could provide a boost to Atlantica's (AY) growth profile or lead to a sale at a premium price.

Atlantica (AY) itself briefly ticked higher in November following a report it may have received a takeover bid.