Shares of Calpine (CPN) continued to trade lower on Wednesday after UBS Warburg cut its estimates and price target for the company.
However, analyst Ronald Barone reiterated a strong buy rating on the stock. He says the recent decline largely is due to liquidity concerns, and a news article that compared Calpine to Enron, and renegotiation of power sales contracts with California. Barone argues the comparison to Enron had little substance; particularly, Calpine doesn't participate in the broadband market and doesn't have significant ownership of international assets.
Barone, however, does agree it has become difficult to analyze and forecast the company's EPS. He adds it's difficult to verify and quantify Calpine's hedges and forward sales. Regarding cash concerns, he thinks Calpine can satisfy its $3.9 billion of cash needs. Barone cut $2.05 2001 EPS estimate to $1.95, $2.40 2002 to $2.10, and his $35 stock price target to $30.