SolarCity Loses Bullish Morgan Stanley Opinion

Morgan Stanley’s Stephen C. Byrd believes SolarCity Corp SCTY's risk-reward is more balanced following the acquisition offer from Tesla Motors Inc TSLA, along with some fundamental business risks.

Byrd has downgraded SolarCity from Overweight to Equal Weight, while lowering the price target from $34 to $24.

Growing Concerns

“Even after TSLA's >10 percent sell-off, the value of the deal equates to ~14 percent upside should it receive approval using the midpoint of TSLA's proposed conversion ratios,” the analyst mentioned.

Related Link: Deutsche Bank: Tesla-SolarCity Acquisition "Not A No Brainer To Us"

For the deal to close, shareholders of both companies would need to vote in favor of the acquisition.

“Based on our discussions with investors and the reaction in both TSLA and SCTY's share prices, many appear to be viewing the deal with skepticism,” the analyst cautioned.

Byrd noted that the deal approval was uncertain and if the deal fell through, not only would SolarCity’s stock see a pullback but several financial issues could potentially be magnified.