Market Overview

Analysts Confident SolarCity Won't Find Higher Bid During Go-Shop Period

Share:
Analysts Confident SolarCity Won't Find Higher Bid During Go-Shop Period

A pair of Wall Street firms are throwing in the towel on SolarCity Corp (NASDAQ: SCTY) because they believe Tesla Motors Inc (NASDAQ: TSLA)’s current buyout offer is the best SolarCity shareholders can hope for.

In a new note on Tuesday, Baird analyst Ben Kallo downgraded SolarCity to Neutral and lowered its price target from $37 to $25.

“Although SCTY has a 45-day go-shop period which could provide additional upside, we believe it is highly likely the TSLA and SCTY merger will go through, and we are moving to the sidelines,” Kallo explains.

He adds that SolarCity’s business is a long-term cash flow story rather than a near-term profit story.

Related Link: SolarCity's Downside Risk Is A Lot More Significant Than Its Upside Potential Until Tesla Deal Is Official

Raymond James analyst Pavel Molchanov agrees that a bidding war for SolarCity is unlikely, and the Tesla deal will likely close as-is.

“Bearing in mind that SCTY shares will be trading from this point on in tandem with TSLA, and since we do not expect a new buyer to enter the picture, we are downgrading SolarCity from Strong Buy to Market Perform,” Molchanov explains.

He acknowledges that there are disappointed shareholders on both sides,  but he still believes the deal will get enough votes to pass. Many Tesla shareholders fail to see the strategic justification for the merger, and SolarCity shareholders believe they got short-changed on the buyout price.

Since the terms of the deal were officially announced on Monday morning, SolarCity shares are down 9.4 percent, and Tesla shares are down 2.8 percent.

Disclosure: the author holds no position in the stocks mentioned.

Latest Ratings for TSLA

DateFirmActionFromTo
Mar 2019RBC CapitalReiteratesUnderperform
Mar 2019Morgan StanleyMaintainsEqual-WeightEqual-Weight
Mar 2019BarclaysMaintainsUnderweightUnderweight

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

Posted-In: Baird Ben KalloAnalyst Color News Downgrades Price Target M&A Analyst Ratings Best of Benzinga

 

Related Articles (TSLA + SCTY)

View Comments and Join the Discussion!

Newmont Mining Attractively Valued In Citi's View

4 Of The Most Important Factors Of Your Credit Score