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Sandler O'Neill upgrades Hercules Capital on valuation, good fundamental trends

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Sandler O'Neill upgrades Hercules Capital on valuation, good fundamental trends

Sandler O'Neill analyst Aaron James Deer upgraded Hercules Capital Inc. to "buy" largely on valuation and good fundamental trends.

Deer wrote in a Feb. 6 note the company's shares dropped to $12.12 on Feb. 5 at closing, 22% down from the shares' April 26, 2017, peak of $15.56. He said the stock's weakness reflects a general market selloff that offers an attractive entry point.

Expecting the venture lending environment to remain favorable, Deer has a positive outlook for Hercules Capital in 2018 given the company's leadership role in the venture debt space. He also said the company could benefit from a legislation that calls for increased capital leverage and streamlining of certain SEC offering and registration processes.

Deer said the lack of a permanent CFO after Mark Harris' "unexpected" departure poses a risk to the company's "buy" rating.

Deer placed his 12-month price target for the company's shares at $13.50. His EPS estimates for the company are $1.35 for 2018 and $1.42 for 2019.