SolarCity (SCTY): Tesla's First Offer Is Too Low, Reit Buy - Baird

Baird analyst, Ben Kallo, would be a buyer of SolarCity (NASDAQ: SCTY) and believes shares have more upside than the initial bid by Tesla Motors (NASDAQ: TSLA). The analyst expects SCTY to remain the leading rooftop installer for the foreseeable future and to continue to lower costs while moving toward becoming cash flow positive. Although scaling the business has required multiple capital raises, SCTY’s balance sheet and financial position should improve as it is able to monetize additional assets, reduce costs, and increase the efficiency of its installation and sales force.

There are several positive outcomes which could occur from the merger proposal. Potential outcomes include: (1) being bought by TSLA for the current proposed bid ($27.42-$29.45 based on TSLA’s July 11 closing price of $224.78), (2) receive a higher bid from TSLA through negotiation, (3) receive a higher bid from a third party, or (4) not accepting TSLA’s bid and proceeding as business as usual. In our opinion, all of these offer long-term investors upside.

No change to price target of $37.

For an analyst ratings summary and ratings history on SolarCity click here. For more ratings news on SolarCity click here.

Shares of SolarCity closed at $24.52 yesterday.

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