Bank of America (BofA) expects Tesla’s shares to plummet nearly 50 percent because of the electric vehicle maker’s decision to acquire beleaguered solar panel provider SolarCity in November.
Tesla shares will fall within the next year to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share, according to BofA research analyst John Murphy. He expects the Silicon Valley company to lose $2 per share over the next year, which is up from the $0.25 loss per share he forecast earlier this year.
“We believe the SolarCity acquisition introduces material risks to the longer-term viability of TSLA, while the recent capital raise only serves to further dilute potential shareholder value,” Murphy said in a note to investors Tuesday.
Goldman Sachs issued similar warnings to Wall Street in February.
Tesla has done good work on producing electric vehicles, Goldman Sachs’ analyst David Tamberrino said at the time, but “our concerns are more near-term oriented with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs.”
Tamberrino was also worried the company would have to sell stock to raise $1.7 billion in order to make room for a possible loss if the Model 3 doesn’t make the grade. The financial institution ultimately downgraded the company from “neutral” to “sell.”
The complexity of the $2.6 billion Tesla-SolarCity merger almost certainly played a part in BofA and Goldman Sachs’ position. Prior to the merger, auto analysts covered the electric vehicle maker, but now, energy analysts are jumping in the fray.
Neither of these industries are likely to have a logical meeting point upon which to make an accurate forecast. Mixed in will be the energy-storage and battery-manufacturing components of the company.
SolarCity’s bizarre business model will also scare away the most bullish of bulls.
The solar panel provider, which leases its panels to customers, reached long-term lease agreements with homeowners who later defaulted on the mortgages, according to a Feb. 22 report from The New York Times. There could be even more default cases, the report notes.
Murphy also suggested that the dip in shares would lead to a sagging confidence in CEO Elon Musk’s ability to mass produce the company’s stable of electric vehicles.
“While we recognize that TSLA is a growing top-line business, we think it is unlikely that investors would continue to supply the company with incremental low cost capital in perpetuity if investments fail to generate return,” Murphy said.
Tesla has not replied to The Daily Caller News Foundation’s request for comment.
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