Vivint said it intended to "seek all legal remedies available" as a result of the "willful breach" of the merger agreement by SunEdison.
"We believe both companies will be better off on their own," Cowen and Co. analysts wrote in a note to clients, noting that U.S. lawmakers had extended solar investment tax credits beyond 2016, breathing new life into the industry.
The Vivint deal was set to expire on March 18, the analysts said, adding that SunEdison could be liable for an amount "well above" the breakup fee of $34 million following a court hearing or likely settlement.
SunEdison was not immediately available for comment.
Like other solar companies, SunEdison has been hit by the drop in oil prices but it has also faced criticism for trying to grow too quickly through acquisitions that it could not afford.
The company, which has a market value of about $600 million, had long-term debt of $9.77 billion as of Sept. 30. SunEdison said on March 1 that it would delay filing its annual report, citing an internal investigation into its financial position.