A Shift May Be Coming At Scorpio Bulkers; Deutsche Bank Is Buying

In a report published Wednesday, Deutsche Bank analyst Amit Mehrotra upgraded the rating on Scorpio Bulkers, Inc. SALT from Hold to Buy, while raising the price target from $2 to $3. The analyst believes that there were several potential catalysts that could lead to an improvement in the sentiment on the stock, while downside was limited due to the excess cash balance.

"SALT mgmt. has provided helpful disclosures related to the amount of secured financing available and equity in SALT's held-for-sale assets," Mehrotra reported, adding, "Those details, together with proceeds from June's follow-on offering, provide SALT with plenty of cash to bridge to an upturn, in our view."

The analyst estimates that Scorpio Bulkers possess $190 million in true excess cash balance, which could help the company cope with significant weakness in the dry bulk market through mid-2017.

In addition, spot rates have increased in recent weeks, standing above the company's cash breakeven levels at present. The analyst also believes that Scorpio Bulkers is on track to reporting positive EBITDA for the very first time in its history in Q3.

Mehrotra believes that another catalyst for positive sentiment on the stock is that "the discount to net asset value should narrow/close as NAV becomes a better gauge of equity value in a stable/recovering environment."