Capstone Analyst Target More Than Doubled (CPST)

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There was an interesting call that came out late yesterday in the alternative energy and green energy sector regarding Capstone Turbine Corp. (NASDAQ: CPST).  Lazard Capital Markets has been positive on this one and had already been deemed aggressive with a call for more than a double, and the new call is for more than a double yet again.

Lazard’s Sanjay Shrestha has reiterated his BUY rating on Capstone, but his $2.50 price target has been jacked up all the way to $6.00.  This reflects higher 2009 targets to reflect growing sales momentum and further penetration in key markets with revised revenue estimates of $50 million, up from $40 Million, after new orders have been coming on strong in the last few weeks.

Shrestha noted, "We believe the company is in the early stages of rapid growth. Capstone is clearly gaining solid traction in its target markets with improving product economics and a growing service revenue component…. We expect the shares to continue to move higher on several near-term catalysts, including additional awards from its target end markets…."

This new target reflects a 25x multiple on a recently increased F2012 EPS estimate of $0.50, discounted by 25% for three years; and it reflects an increased shipment projection for 2012 of 400 MW, up from 200 MW.

Capstone remains an active pick on our own weekly "10 Stocks Under $10" newsletter.  We have been on this one since $1.21 and have only recently noted that investors should take at least a little profit on part of the position, although we want some funds to stay in Capstone as it should head higher.  To date, it is grossly under-followed by Wall Street. Those profits should be rolled into our new "go-to" alternative energy stock that is also in the "under $10" category, and even trial memberships can get access to our new pick in the alternative energy sector.  We had always maintained that Capstone could go to $4.00 or higher rather than $2.50, and our new pick in the group is already up by 17% in the two weeks since we added it to our active list.  Our target on the new call was for a gain of nearly 50% if our price target was hit, although our target was very conservative compared to other existing price targets.

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Jon C. Ogg
April 15, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.