Dynegy (DYN) reported $0.41 Q1 recurring EPS. Wachovia upgraded the shares to buy from market perform.
Analyst Thomas Hamlin says the upgrade was based on the stock's valuation and strength in Dynegy's core energy business. He says near term uncertainties related to Moody's review of the company's debt for a possible downgrade and a Securities and Exchange Commission inquiry remain, but much of the downside risk appears priced into the stock. Despite the communications segment's problems, Hamlin says the core energy biz remains healthy. He says he is comfortable with the company's near term liquidity position irrespective of any potential Moody's action. With the shares trading at about 6 times his $2.30 EPS estimate for 2003, Hamlin thinks the stock's valuation is compelling. He has a$20 price target on the stock.