8Point3 Downgraded On Increasing Concerns Regarding Its Future

Wells Fargo Securities downgraded shares of 8Point3 Energy Partners LP (NASDAQ: CAFD) and lowered its price target on Thursday, citing growth/strategic concerns given future sponsorship uncertainties.

Concerns Abound

Analysts Glen Pruitt, Neil Kalton and Sarah Akers noted that increasing concerns arise in the wake of First Solar, Inc. (NASDAQ: FSLR) announcement that it is pursuing strategic alternatives for its 30 percent interest in 8Point3.

Difficult To Grow CAFD/Share

Wells Fargo Securities attributed the 8Point3 management's inability to acquire the two large solar projects that were being offered by First Solar to its current inability to raise equity capital on reasonable terms. Consequently, award to a third party is likely.

"Without the acquisition of the two large projects, and absent the ability to drop down additional projects, we believe it will be difficult for 8Point3 to grow cash available for distribution, or CAFD, per share," the firm said.

Reducing Estimates Starting In 2018

The firm adjusted its 2017 and 2018 CAFD per share estimates for 8Point3 to $1.31 and $1.39, respectively from $1.30 and $1.60.

"We are reducing our estimates starting in 2018 due to the high probability, in our opinion, that the company will not able to drop down the 280MW California Flats project or the 40MW Cuyama solar project as previously contemplated," the firm reasoned.

Wells Fargo Securities, though believing SunPower Corporation (NASDAQ: SPWR) will continue to provide drop down opportunities in the event of a First Solar exit, is concerned that 8Point3's access to capital could be limited for the foreseeable future, making drop downs untenable.

Downgrading Rating/Lowering Price Target

As such, Wells Fargo Securities downgraded shares of 8Point3 Energy to Market Perform and reduced its 12–18-month valuation range to $11–$12/share from $16–$17/share on lower than expected project acquisitions.

The firm attributed the price target reduction to its increasing belief that the company will need to burn some of the available cash to convert solar panel production to the new Series 6 configuration.

At the time of writing, shares of 8Point3 Energy was slumping 9.69 percent to $11.93 on more than four times their average volume.

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