Sunedison Inc (SUNE), SunTrust Banks, Inc. (STI): Last Friday’s Top Upgrades (and Downgrades)

Investors are selling off the stock in response, and I don’t blame them. Unprofitable today, bearing more than $2 billion in net debt, and burning cash at the rate of $626 million per year at last report, Sunedison Inc (NYSE:SUNE) is clearly a company in dire straits. Shareholders may be upset by today’s downgrade, but if you ask me, Ardour cut this company a break in only downgrading to hold. With numbers like these, the stock could just as easily have been cut to sell.

Will SunTrust come out tomorrow?
A second “sun” stock getting hammered this morning is SunTrust Banks, Inc. (NYSE:STI). Last month, SunTrust investors received good news in the form of a price target hike to $36 per share from analysts at Jefferies. This morning, expectations moved the other way, as analysts at Argus Research set a price target of $35, and reduced their rating to hold.

Here, though, I think the analyst may be too pessimistic. Priced at less than nine times earnings today, but expected to grow these earnings at 10% annually over the next five years, SunTrust Banks, Inc. (NYSE:STI) shares simply don’t look that expensive to me. Add in a modest 1.1% dividend, and I’m almost tempted to call them “cheap.”

The stock sells for less than book value — 0.9 times book, in fact — right in line with the TV valuations at major megabanks such as J.P. Morgan, Bank of America, Citigroup. Long story short, I see SunTrust Banks, Inc. (NYSE:STI) shares as, at worst, fairly valued, and potentially… cheap enough to buy.

The article Friday’s Top Upgrades (and Downgrades) originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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