Bank Of America Downgrades Tesla Due To SolarCity Concerns

MAY 10 2017 BY ERIC LOVEDAY 44

Bank of America analyst John Murphy sees SolarCity as a concern to Tesla’s overall financial health.

With a workforce cut by 20% in 2016 and amidst other financial struggles, SolarCity may be a burden to Tesla’s financial future. As such, at least one analyst has downgraded Tesla based on these concerns.

CNBC states:

“…there’s ‘material risk’ to the long-term viability of Tesla”

“Bank of America analyst John Murphy believes Tesla acquisition of SolarCity will result in a loss of $2 in earnings per share this year.”

Tesla’s recent acquisition of SolarCity has seen its fair share of negativity, but now it seems analysts are concerned over the financial outlook of the solar company, as well as the overall impact the merger has on Tesla.

CNBC adds:

“Bank of America Merrill Lynch cut its price forecast on Tesla shares on Tuesday, saying the electric car maker’s “long-term viability” was at risk because of the acquisition of SolarCity.”

“The investment firm now believes the stock will be nearly cut in half over the next 12 months because “positive earnings and cash flow [are] now even more elusive” in light of the combination.”

Quoting analyst John Murphy, from a note sent to investors:

“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 predicts TSLA shares will fall to $165. He further states that Tesla’s earnings will be reduced in 2017. Here’s the synapsis:

“Murphy also said he is cutting his 2017 earnings estimate on the combined entity from a 25 cent loss per share to a $2 loss. Looking to 2018, he lowered estimates from $2.05 a share to $1.65 but set 2019 estimates “optimistically” at $4.55 a share.”

CNBC attempted to contact Tesla for a statement on the matter. Tesla did not immediately comment.

Source: CNBC

Categories: Tesla

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44 Comments on "Bank Of America Downgrades Tesla Due To SolarCity Concerns"

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Cavaron

“The investment firm now believes the stock will be nearly cut in half over the next 12 months”

Oh man, I would buy so much more Tesla stock in that case!

Mister G

Yes if it drops to $165 I’m buying lol

Pushmi-Pullyu

“Bank of America Merrill Lynch cut its price forecast on Tesla shares on Tuesday, saying the electric car maker’s “long-term viability” was at risk because of the acquisition of SolarCity.”

But Tesla acquired SolarCity months ago. Why would any competent financial forecasting company wait so long before revising their rating of the company?

“The investment firm now believes the stock will be nearly cut in half over the next 12 months because “positive earnings and cash flow [are] now even more elusive” in light of the combination.”

Now you’re sounding like just another Tesla shorter, who have been predicting that will happen for years now. Funny thing; it never does!

Here’s my “analysis” of Bank of America: They are currently shorting TSLA, and are promoting that position.

Tesla bashing predictions from short-sellers are no more persuasive when coming from Bank of America than they are from all the losers who are self-appointed “analysts” making blog posts on Seeking Alpha.

DJ

Dude, you think that anybody who doesn’t say everything insanely positive about Tesla is “shorting their stock”…

Me: I don’t really like the rims on the Model S.

You: You must me shorting Tesla stock!!!!!!

Me: I think the falcon wing doors and front windshield on the X are stupid.

You: You must be shorting Tesla stock!!!

Broken record much…

It’s very clear that Tesla stock is insanely overvalued. When will it correct itself (either a little or a lot)? Only time will tell.

Pushmi-Pullyu

I certainly criticize Tesla when I think they deserve it. I also praise them when I think they deserve that, which is far more frequently.

When someone constantly makes posts to InsideEVs about Tesla which are always negative, posts which nearly always contain half-truths or completely false info, then it’s not hard to see they have a hidden agenda. Perhaps not all of the Tesla bashers regularly posting here — and that includes you, DJ — are shorting Tesla stock, but since most of them repeat exactly the same FUD posted to the Seeking Alpha investor site, it seems that most of them are.

To be fair, DJ, I haven’t noticed you cut-and-pasting anti-Tesla FUD from other websites, as some or most of the other Usual Suspects do. But if you’re not a Tesla short-seller, then you’re certainly an exception among the serial Tesla bashers.

James

The delays/recent announcements of only 2 available solar roofs didn’t go well for them.

Tesla needs deals with big contractors for whole developments having Solar City roof tiles.

It’s a bang-up product, only thing is, like lithium batteries for cars – it’s a volume business. Without volume sales, those roofs are for the rich.

The upside for Tesla, with it’s energy storage business and possible solar roof explosion in the industry – could be very good indeed.

I say hang on – your wait will be rewarded.

hundreds of Model 3 robots are being put in place as we speak. The M3 mules are out and about testing, and all seems on track in that area.

Solar City needs to finish up it’s New Jersey Gigafactory and get on with making tons and tons of solar roofs and panels.

Until then, it will be a drag on the company, for sure.

James

The whole deal with any sustainable/green technology today is this notion that instead of a down payment + paying monthly interest to buy consumer products you don’t really need…You pay UP FRONT for a future savings IF you live in that home for 20-25 years or more.

It’s a tough sell in this ADHD world we live in today. Also, people move around a lot. Appraisers in my area don’t give you any extra value on your home price when you have a solar water heater, wind turbine or solar panels. They just don’t. So the sell is a hard one.

Even Tesla cars at $100-140,000 apiece, are a hard sell if one does a dollar-cost analysis. All these folks who do so online realize it’s a long game. You don’t profit or save in the short term. It’s after you don’t have to pay for parts and service on that greasy, dirty smoke machine out in the garage after 70,000 miles – and go to that emissions test every other year, that you begin to realize how wise you were to pay up front for that snazzy Tesla.

ModernMarvelFan

“Solar City needs to finish up it’s New Jersey Gigafactory and get on with making tons and tons of solar roofs and panels.”

New York != New Jersey.

George Bower

James,
“The delays/recent announcements of only 2 available solar roofs didn’t go well for them.”

I saw the article on the new roofs and they are expensive. But they are trick and some people with lots of money will buy them.

This is good.

Elon is re making Solar City and it will take some time but they are a vertically integrated set of companies now.

Elon will make his own electricity and store it in his batteries made at the giga factory.

Then he will sell you a car or a truck that uses that electricity.

It’s genius.

I expect a whole new super charging network just for semis. Nikola one promised free hydrogen and Elon can match the bet even sooner.

I think B of A also said he could never land a spent booster on a rocking barge in the ocean.

ModernMarvelFan

“But if you’re not a Tesla short-seller, then you’re certainly an exception among the serial Tesla bashers.”

So, when you criticize Tesla or praise it, then it must be reasonable. But when others criticize Tesla, they must be a serial Tesla basher or a stock shorter. According to that stupid logic, aren’t people who are “serial Tesla praiser” automatically a stock pumper? Maybe they are all going long on TSLA position…

Pushmi-Pullyu

ModernMarvelFan said:

“But when others criticize Tesla, they must be a serial Tesla basher or a stock shorter.”

I see your reading comprehension is lacking today, MMF. That’s not like you.

I very clearly said:

“When someone constantly makes posts to InsideEVs about Tesla which are always negative, posts which nearly always contain half-truths or completely false info, then it’s not hard to see they have a hidden agenda.”

I’m not complaining about people who post honest criticisms of Tesla.

Andrew

3 words.. Infinite roof warranty. Now think how many homes will be built with the solar shingles… How do people not see the big picture in the future and where this is all headed? My god! People that doubt Tesla are the same people that would’ve doubted Henry Ford’s Model T. Enjoy the horse carriage fellas. I’ll enjoy my Model S and 3 🙂

DangerHV

“Here’s my “analysis” of Bank of America: They are currently shorting TSLA, and are promoting that position.”

My first thought as well. This should be illegal.

Dan

Nice try. Analysts are not allowed to trade the stocks they are rating.

Pushmi-Pullyu

That appears to be rather naive.

Just read the “Market manipulation” section of Jim Cramer’s bio at Wikipedia:

https://en.wikipedia.org/wiki/Jim_Cramer#Market_manipulation

Nix
Dan, I think you might have the Chinese Wall between client information and analysts in mind. For example, when BofA has an account with Tesla, they have employees who will be privy to inside private information while servicing their client Tesla. BofA is banned from allowing those employees from sharing this information to other parts of the company that might be involved with trading or ratings, etc. That would be insider trading, and a Chinese Wall has to be strictly maintained between those two sides of the business. But there is no such wall between analysts and traders, nor is there a conflict between investing and advising. Bank of America owns shares in every single stock in pretty much every single major global trading platform. They have to in order to offer a variety of index products. This is true for every single investment bank. They certainly are not banned from offering any investment advice just because they have holdings in those stocks. Nor are they banned from trading those stocks based upon the advise of their own analyst’s advice. Or counter-trading against their own “sh!tty deal”. It is all legal, even if it is unethical. That is what happens… Read more »
Blad

Exactly what I’m thinking; and, the sad part is people believe this propaganda and will knock the stock down. It’s all legal and they all do it. At one time the SEC offered up rules requiring full disclosure when a stock company tries to manipulate stock in their own interest…the market is rigged in favor of the investment companies, now called banks, and this ain’t Fake Trump news.

Pushmi-Pullyu

“…the market is rigged in favor of the investment companies”

Indeed, the pervasiveness of the cheating, corruption and manipulation in financial markets, the way they have been rigged to funnel money to the rich 1% and the large investment companies, is both shocking and astounding.

It is amazing to me that there isn’t — at the very least — a huge constant public outcry against this. There are lots of small investors getting bled dry by manipulation of the financial markets by rich or well-connected vampires who can “game the system”.

TNT

Tesla still up today. When will the rally stop? I hope the stock is cut in half. I will buy loads of it.

jelloslug

Something tells me that this downgrade was devised and written before the introduction of the solar roof tiles today.

Nix

Mergers always have cuts in workforce. That is one of the benefits of a merger.

In this case, Tesla is moving sales into existing Tesla locations, instead of having them go door-to-door. That reduces labor. In fact, in their test pilot program, they saw a 2:1 labor reduction moving sales to an existing Tesla retail location.

Vexar

And yet the TSLA value is at an all-time high of $325 a share. OK, BofA, thanks for your thoughts there. They just announced solar roof tiles which are going to disrupt the premium roofing market like never before.

EV4Life

Biggest problem with that “analysis”?
The part that says “electric car maker” – that right there is why they’re predicting doom and gloom. They haven’t caught on that Tesla isn’t a car company anymore and hasn’t been for a while.
Tesla expect that the energy part of their business will far outstrip that of their EVs.
Also funny that this downgrade arrives on the day that solar roof pricing is announced, which turns out to be cheaper than most people predicted.

Spider-Dan

It would be difficult to find words to describe how utterly unimpressive the non-car part of Tesla’s business is.

It is my opinion that Tesla should focus more on becoming a stable, profitable automaker and less on sticking their finger into any pie with “green electricity” listed in the ingredients. Tesla’s stock price is certainly impressive, but if Tesla isn’t fully-self-sustaining when (not if) the tech bubble pops, they will go the way of Webvan.

Pushmi-Pullyu

Right, it’s not like Tesla has a popular and well-reviewed product which they can sell at a comfortable gross profit margin, one which nobody else makes. Just like all those companies that failed in the dot-com bubble, they don’t actually have a valuable product or service to sell.

Oh, wait…

Well, it’s not like Tesla is growing by leaps and bounds every year.

Oh, wait…

It’s exactly that, not just “like that”; and nothing like what you’re claiming, Spider-Dan.

Mister G

Spider-Man you have to many spider webs clogging your brain LOL

Someone out there

Seems about right.

James
I liken folks who understand the value of solar, wind and geo-thermal to those fans who would tire of their favorite sports team emphasizing defense as it’s key strategy to victory. Sure – you whined and pissed because they didn’t hire the multi-million dollar big hitter, or the Fancy-Dan quarterback from the SEC college that lit it up. But then, you slowly saw the wisdom of that general manager and coach as you saw your team win…again, and again and again. Soon, you became a student of the game. No more long bombs and smart-ass entitled star receivers, but guys who fought in the trenches, tackled and ran the ball like bulls and fielded the baseball like magicians – playing “small ball” and winning those close games 2-1 in the 9th. Sustainable energy people buy EVs and miss that drama and stress of repairs and replacement parts every month. The gaskets and the filters, the mufflers and the oxygen sensors, the catalytic converters and crap that is draining your wallet dry. Sure, the first 70,000 miles on that complex gasser was fun and fancy-free, for all but the yearly emissions check. It’s like the tortoise and the hare story all… Read more »
Nix

moneyball FTW

ModernMarvelFan

We all knew that SCTY was bailed out by TSLA. It was obvious. Part of the continue cut to SCTY operation was to reduce the drag on TSLA. The entire bailout was about saving the SCTY brand name and nothing else since everything from inside/out are revamped at SCTY. So, the so called drag on TSLA was already realized back when the bailout was announced.

Existing TSLA doesn’t seem to care about it much ever since the Model 3 production news are confirmed. So, I seriously doubt SCTY would affect that. As long as it doesn’t, the current over inflated price of TSLA was purly based on Model 3 news which has very little effect due to SCTY, positive or negative. So, using SCTY as a reason to justify TSLA stock price isn’t a good analysis in my opinion. As far as cash flow goes, sure, it will have some impact, but TSLA seems to be able to raise cash easily just based on Model 3, Model Y and Semi news alone.

JeffD

I wouldn’t trust whatever B of A said. They were a big part of the housing bubble and have continued to foreclose on houses needlessly.

Bob Nan

All these bankers know that Tesla is a Buy, but they say its a Sell, so that they can Buy.

Why would I Sell. All those who tried to short got their hands burnt.

Jake Brake

First off BOA is a bunch of crooks.

Second, solar city is really a long term finance company. Once the capital investment of each solar system has beem paid off they are just printing money. Unfortunantly this takes 10-15 years which is way longer than the stock market has patience for. Short term they will burn cash while gaining market share. Long term they will be a cash cow.

unlucky

They’re selling off the systems to customers ahead of time and getting out of the leasing business.

unlucky

I still don’t like what TSLA did. Using shareholder money to bail out your cousin should be punished. There were much better ways for TSLA to spend money to enter the solar biz and they didn’t take them, they instead took the route that benefits Musk and his cousin in the process.

Despite all that I can’t see the stock falling as much as this analyst says. There is too much irrational exuberance holding it up for a problem such as this to drag it down that low.

Pushmi-Pullyu

I didn’t think Tesla should buy out (bailout) SolarCity, either. But the stockholders voted for it.

Suggesting Tesla should be “punished” for doing what the stockholders voted for, unlucky, merely makes it look like you’ve got an axe to grind… or that you’re whining over how much money you’ve lost short-selling Tesla stock.

unlucky

Again, just because the board can get a vote which votes shareholder money into their pocket doesn’t mean they aren’t violating their charter and their fiduciary duty. They’ve already been sued by shareholders over this, to see if what they did really was legal we’ll have to wait for the outcome of that suit.

Nix

Everybody on both boards with even a hint of conflict of interest recused themselves from voting.

It is like you go out of your way to prove your ignorance every day.

unlucky

What does what you just said have anything to do with what I said?

The board got a vote which put shareholder money into their pockets. Did I say the board voted? Why do you think pointing out that some board members didn’t vote is counter to this point?

alexa

Tesla is like socialism. At some point it will run out of other people’s money. Chapter 11 at some stage in 2018.

Heartless_Conservative

I don’t trust BofA any further than I could throw a cheesecake underwater…

Pushmi-Pullyu

But how do we know you’re not the world champion of the international underwater cheesecake-throwing sport? 😉

Steven

Due to previous experience with BoA, if they said it was raining, I’d still put on sun screen.

Mister G

If TSLA drops below $200 I’m buying LOL