The downgrade reflects TerraForm Power's delayed 10K filing and the risk of a bankruptcy filing by parent company SunEdison (SUNE), JPMorgan analysts wrote in a note.
Fellow yieldco TerraForm Global (GLBL) yesterday warned of "substantial risk" that SunEdison will seek bankruptcy protection soon.
A SunEdison bankruptcy could threaten TerraForm Power through possible "change of control" clauses in early-vintage solar power purchase agreements that were handed down to TerraForm Power as well as cross-collateralization agreements embedded in project-level debt, according to the firm.
"While we think that TERP can overcome these risks (in worst-case scenario, both weigh on cash-flow relative to current expectations), we cannot justify adding to positions in this stock until the risks are better known and the company becomes current with its SEC filings," JPMorgan added.
Shares are flat in pre-market trading on Wednesday after closing up by 1.65% to $8.61 yesterday.
Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D.
TerraForm Power's weaknesses include its deteriorating net income and generally high debt management risk.
You can view the full analysis from the report here: TERP
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.