NEW YORK (TheStreet) -- Shares of Calpine Corp. (CPN) are up 5.02% to $21.13 after Deutsche Bank upgraded the the Houston-based independent wholesale power producer to "buy" from "hold" and raised its price target to $31 from $25.
"We think CPN's presence in the East, Texas and West provides geographic diversity and its exclusive reliance on natural gas as an input fuel cost, suggests that if natural gas falls further and pulls down power prices with it, CPN would be a relative winner in that environment, justifying its peer group 0.5x multiple premium," Deutsche Bank analysts said.
Calpine also possesses a "hidden gem" in its Geysers, a 725 MW renewable energy asset in California, they said.
Deutsche Bank expects that the company will continue to maintain a "disciplined investment focus" as recently highlighted by placing a hold on a potential Texas expansion.
Furthermore, analysts foresee that the company will use its substantial cash flow generation to buy back shares, supporting substantial free cash flow and share growth.
Separately, TheStreet Ratings team rates CALPINE CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate CALPINE CORP (CPN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year, compelling growth in net income and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CPN's revenue growth has slightly outpaced the industry average of 0.8%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Independent Power Producers & Energy Traders industry and the overall market, CALPINE CORP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Independent Power Producers & Energy Traders industry. The net income increased by 100.7% when compared to the same quarter one year prior, rising from $306.00 million to $614.00 million.
- CALPINE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CALPINE CORP reported lower earnings of $0.03 versus $0.45 in the prior year. This year, the market expects an improvement in earnings ($0.77 versus $0.03).
- You can view the full analysis from the report here: CPN Ratings Report