Analysts that follow SunEdison Inc (NYSE:SUNE) may finally be giving up on the company. There’s not much to be bullish about SUNE stock these days, as the company’s cash reserves start to dwindle and a major contract with Hawaiian Electric Industries, Inc. (NYSE:HE) was cancelled last week.
Analysts have gotten so worried that they are starting to slash their price targets on SUNE stock.
Bank of America Merrill Lynch analyst Krish Sankar downgraded his rating on the company from “Buy” to “Neutral” and also cut SUNE stock’s price target from $10.00 to $2.50.
Sankar expressed three main concerns with SunEdison:
“(1) continued concerns around access to financing, (2) legal issues related to the Latin America Power (LAP) and Vivint Solar Inc (NYSE:VSLR) transactions, and (3) execution challenges given the significant numbers of distractions facing the management team.” (Source: “Are Analysts Giving Up on SunEdison?” 24/7 Wall St, February 21, 2016.)
Credit Suisse also slashed its price target. The firm cut SUNE stock’s price target from $19.00 to $3.00 and also downgraded the stock from “Outperform” to “Neutral.” Credit Suisse noted that it has concerns with the company’s “uncertain near-term liquidity profile,” due to recent developments. (Source: “SunEdison (SUNE) Stock Down as Credit Suisse Cuts to ‘Neutral’,” TheStreet, February 19, 2016.)
According to Credit Suisse, the lost contract with Hawaiian Electric could lead to the reinstatement of about $215 million in debt due April 1, 2016. (Source: Ibid.)
“Put simply, SunEdison has tried to run too quickly—seeking hyper growth at the same time capital markets are more challenged—constraining their balance sheet,” Credit Suisse noted. (Source: Ibid.)
And there’s more…
An analyst at Janney Montgomery Scott LLC also voiced similar concerns about SunEdison. Janney’s Michael Gaugler downgraded SUNE stock from “Buy” to “Neutral,” while lowering its SunEdison stock price target to $5.50. The downgrade is largely based on the cancelled contract with Hawaiian Electric, which is a sign of larger, more serious issues.
Gaugler noted that the cancelled project “could be indicative of more serious cash flow concerns than we previously anticipated, and that the likelihood of SunEdison achieving the aggregate cash walk outlined in its 1/7/16 [January 7, 2016] business update has diminished.” (Source: “Janney’s Gaugler Downgrades Sunedison On HECO Termination, Warns Cash Outlook Might Not Be Met,” Yahoo! Finance, February 19, 2016.)
Gaugler added that other companies might now become hesitant to partner with SUNE stock, which will have a detrimental effect on SunEdison Inc as a company.