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Sunrun Unveils Tesla-Backed Storage In Net-Metering Rattled Hawaii

No. 2 residential solar installer Sunrun ( RUN ) could trigger Hawaiian solar growth with a Tesla Motors ( TSLA ) battery-backed storage offering following regulators’ 2015 decision to cut net-metering subsidies, a Credit Suisse analyst said Monday. And despite a bulkier subsidy cut in Nevada that doesn’t grandfather in existing customers, Sunrun will flare on its impressive access to capital, Credit Suisse analyst Patrick Jobin wrote in a research report. Jobin retained an outperform rating and 21 price target on Sunrun stock. Sunrun stock was up a fraction in afternoon trading on the stock market today , while shares of No. 1 installer  SolarCity ( SCTY ) were down 1%. IBD’s 21-company Energy-Solar industry group was down nearly 1%, after falling 1.5% Friday. It ranks No. 54 out of 197 groups tracked. Year to date, Sunrun and SolarCity stocks are down a respective 43% and 47%, under-performing the industry group that has fallen 22% on continued volatility in Nevada despite Congress’ late December extension to a key federal subsidy. Still, “industry dynamics continue to favor Sunrun and SolarCity and highlight increasing barriers to entry,” Jobin wrote. “Further, we were impressed with Sunrun’s ability to outmaneuver peers in the capital markets.” Jobin sees a 214% upside to Sunrun stock. Sunrun, SolarCity Curb 2016 Growth In Q4, Sunrun guided to 40% growth in 2016 vs. consensus expectations for 60%-80% growth, echoing SolarCity, which earlier indicated 44% growth vs. traditional annual growth of 80%. But Sunrun and SolarCity differ in their rationale. SolarCity is aiming to become cash flow positive. Sunrun is focusing on cost reductions and maximized returns and, this month, guided to a 15% year-over-year reduction in 2016 for its channel business . Instead, Sunrun now expects to double its direct business over the course of 2016. “The company is on the fastest path to reaching the ‘Holy Grail’ of residential solar leasing companies whereby the third-party capital can cover all upfront costs,” Jobin wrote. Sunrun also unveiled a solar-plus-storage solution coined BrightBox to reinvigorate Hawaiian solar growth, after the state suspended payments to solar customers for excess energy fed back into the grid. The state was at 17% solar penetration when that vote came down. Firms like SunPower ( SPWR ), SolarCity, SolarEdge ( SEDG ) and Sunrun have long worked to make solar storage economical. Without it, utilities must buy the excess energy fed back into the grid. In 2015, however, Nevada and Hawaii cut net-metering payments to solar customers. Within a day, SolarCity and Sunrun said they would exit Nevada, the latter threatening to file suit. Now, Sunrun has managed to reduce its solar storage costs by 50% year over year, Jobin wrote. BrightBox customers are expected to reduce their utility bills by 15%. “The adoption of solar plus storage, if economic, can mitigate the risk in other states if utilities degrade the economics of net-metered energy,” he wrote. And “a solar plus storage solution in Hawaii should allow growth to resume.” In Hawaii, neighborhood constraints have restricted new customers from adopting solar. The BrightBox solution circumvents those restrictions, allowing Sunrun to tap into the remaining 83% of the state without solar.

Yahoo Facing A ‘Take Under’ As Facebook Deal Rumored, Products Cut

Yahoo ( YHOO ) could be facing a “take-under” — a buyout price lower than market value — from any of a number of private equity firms that might then dismantle the troubled Web company, an analyst said Monday. Private equity groups including Silver Lake, TPG and Blackstone might be interested in Yahoo, Rosenblatt Securities said in a research note. Yahoo has been looking at potential buyers while it pares costs, as the company has struggled to re-spark growth. “Yahoo did not get any seasonal uplift from 4Q digital media advertising demand, relative to its much larger peers like Facebook ( FB ) and Alphabet ( GOOGL ), which we think underscores the ongoing competitive challenges for audience and engagement growth across digital media platforms and properties,” wrote Rosenblatt analyst Martin Pyykkonen. “We would expect large private equity investors to seek a deep discount, perhaps even a take-under relative to Yahoo’s implied market value, with an intent to split the core business apart to try to generate value from the sum of the parts vs. the current whole value of the core business,” Pyykkonen said. Rosenblatt maintains a sell rating and price target of 30 on Yahoo stock. Yahoo stock rose 0.7% to 35.40 in afternoon trading in the stock market today ,  earlier touching a three-month high of 36.10. Excluding its 15% stake in China e-commerce giant Alibaba Group ( BABA ), Pyykkonen said, “Yahoo’s current market cap implies $3.3 billion valuation for the core business and the Yahoo Japan stake. We think the fundamental outlook for Yahoo as a ‘growth’ stock is continuing to erode, especially in light of strong secular trends which are benefiting the likes of Facebook and Google owner Alphabet, both of which have more revenue concentration from mobile advertising,” he said. Yahoo’s overall market value currently is near $33.5 billion. Is Yahoo The Next DoubleClick? “Financial engineering” alone won’t fix Yahoo’s growth ills, Pyykkonen said. He pointed to the once-public DoubleClick as an example of what might happen with Yahoo. “In 2005, DoubleClick was acquired by private equity firms Hellman, Friedman and JMI Equity for $1.1B and then sold to Alphabet (Google) just two years later, in 2007, for $3.1 billion. The nearly 3x private equity return was due to DoubleClick being a broken company and stock with poor management execution, but also having core technology and a revenue growth outlook,” said Pyykkonen. In a recent securities filing , Yahoo said it has written down the value of its Tumblr operation by 20% as the microblog’s revenue did not meet Yahoo’s internal projection for 2015, he said. A report in The Information said that Yahoo is considering a deal with Facebook to allow the giant social network to sell ads inside Tumblr’s mobile app, with Yahoo and Facebook splitting the revenue. Tumblr is among the few assets within Yahoo whose audience is growing, The Information said. Yahoo CEO Marissa Mayer is under intensified pressure from major investor Starboard Value, which has urged the exit of Mayer and some directors, as well as the spinoff of Yahoo’s core search business. Yahoo directors are close to offering at least two board seats to the activist hedge fund in order to avert a proxy fight, according to a recent New York Post report. Board member nominations are due by March 26, said Pyykkonen. Dozens of groups are expressing interest in buying the struggling Yahoo, say analysts, with Verizon ( VZ ) among those said to be the most likely acquirer. Facebook and Alphabet carry the highest-possible IBD Composite Rating of 99, while Alibaba has a CR of 82 and Yahoo’s CR is just 40.

Valeant CEO Quits As Ackman Joins Board; Ex-CFO Under Fire

Big changes were brewing at embattled drugmaker Valeant Pharmaceuticals International ( VRX ) Monday, as CEO J. Michael Pearson said he’s leaving as major shareholder William Ackman took a larger role in the company. The stock was up 9% in afternoon trading Monday. Valeant said that it had begun searching for a new CEO to replace Pearson, without specifying Pearson’s departure date. Pearson has headed Valeant for a highly transformative eight years, as a battery of acquisitions brought the company from less than $1 billion in annual revenue to more than $10 billion last year, with a policy of cost-cutting and price increases on acquired drugs making Valeant a favorite of investors but a target of criticism elsewhere. Last fall it all started to collapse, however, as a scandal relating to specialty pharmacy Philidor raised larger issues with Valeant’s accounting. In Monday’s announcement, Valeant said that the ad hoc committee that started reviewing company finances five months ago was nearing completion of its work, and Valeant will have to restate financials for all of 2014 as well as the first quarter of 2015. The statement also said that Valeant plans to file its tardy 10-K for 2015 by April 29, which will prevent it from going into credit default. The discovery of new accounting problems in addition to the Philidor-related ones delayed the filing, the company said. Meanwhile, Ackman, head of hedge fund Pershing Square Capital, will join the board in place of Katharine Stevenson. Ackman had indicated in a letter following Valeant’s d isastrous Q4 earnings report last week that he plans to take a more “proactive” role in protecting Pershing’s large investment in the company, so his joining the board was not a surprise. Valeant’s Ex-CFO Takes Heat A noteworthy development, however, was that Ackman was evidently targeting not only Pearson but former CFO Howard Schiller, who served from December 2011 until last April, when he left his CFO position but remained on the board. The Monday press release fingered Schiller and the leadership in general as the main cause of Valeant’s problems. “The improper conduct of the company’s former chief financial officer and former corporate controller, which resulted in the provision of incorrect information to the committee and the company’s auditors, contributed to the misstatement of results,” it said. “In addition, as part of this assessment of internal control over financial reporting, the company has determined that the tone at the top of the organization and the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company’s improper revenue recognition.” The release said that Schiller had been asked to resign from the board but refused, setting things up for even more drama in a company that’s already resembling a soap opera. Later Monday, Schiller issued a statement refuting the charges. “Contrary to the statement in the 8-K and press release, at no time did I engage in any improper conduct that relates to any restatement of revenue the company is considering,” Schiller said in the statement. “In addition, at no time did I ever provide any incorrect information to the Audit and Risk Committee or the company’s outside auditors regarding this accounting issue.” Schiller shifted responsibility to the corporate controller, who has been put on administrative leave, according to Monday’s SEC filing. He said that she was the one who evaluated the Philidor situation and decided how to account for it, and he trusted her opinion. Valeant said that, on a preliminary basis, the restatement will subtract $58 million from 2014 revenue and 9 cents from EPS. The first quarter of 2015 should lose $21 million in revenue but gain 7 cents a share in earnings, it said. Wall Street analysts have been turning against Valeant and its management with a vengeance lately, and Monday brought two more downgrades before the CEO news came out. Morningstar warned that change isn’t going to come cheap. “We currently incorporate more than $1 billion in restructuring, legal, and other charges over the next few years,” wrote Morningstar analyst Michael Waterhouse in a research note. Valeant stock rose as much as 17% in early trading on the stock market today , above 31.50, but shares also slipped a bit later and fell below 26, the stock’s lowest price since November 2010. Shares have still plummeted nearly 90% since hitting an all-time high in early August near 264.