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.
"...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.
"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 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.