** Shares of financial guarantee insurance provider MBIA MBI.N jump 12.4% to $6.78; highest in more than six months

** KBW upgrades MBI to "outperform" from "market perform"; raises stock PT to $9 from $6.5, a 49.3% upside to stock's last close

** Brokerage says a U.S. Appeals Court last week siding with Puerto Rico Electric Power Authority (PREPA) bondholders is undoubtedly positive for financial guarantors, including MBI

** The Appeals Court, in June, had ruled that PREPA bondholders had a full claim on $8.5 bln dues, owed to them

** New PT assumes 80% settled recovery on PREPA claims, MBI's subsidiary National being sold at 65% of its statutory capital, and holding company liabilities being settled at face value - KBW

** KBW believes a potential sale of MBI's National is most likely, although the timing is admittedly uncertain

** Two of four brokerages rate the stock "buy" or higher and two "hold"; median PT is $6.75, according to data compiled by LSEG

** As of last close, MBIA shares down 1.5% YTD

(Reporting by Arasu Kannagi Basil in Bengaluru)

((ArasuKannagi.Basil@thomsonreuters.com;))