Consumer discretionary

SolarCity Corp (SCTY) Is Worth More Than Tesla Motors Inc’s (TSLA) Initial Bid – Baird

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The analyst believes that SolarCity Corp has several positive catalysts

SolarCity Corp (NASDAQ:SCTY) shareholders are more than just happy to have found their company inches away from potential acquisition by Tesla Motors Inc. (NASDAQ:TSLA). After a go ahead from its board of directors Tesla has now officially placed a bid for stake in SCTY which implies valuation of about $27.42 to $29.45. Given the recent stock price, this provides a potential upside of about 14%, but in Ben Kallo’s view, SCTY might be worth a tad more.

Ben Kallo, analyst at Baird, believes the stock is going to keep performing strongly in the next few years and will establish its dominance in the market. The company’s cost cutting structure and efficiency is currently outpacing the industry and it’s expected to continue to hold its market share as a rooftop solar panel installer. The analyst expects the financials to move towards betterment and make the balance sheet far more presentable. Despite requiring multiple fund raising rounds in order to facilitate the financial needs.

Analyzing prospects from this point onwards, there are several positive outcomes that are more than probable. The first scenario is acquisition by Tesla for the current proposed bid of $27.42 to $29.45, second scenario involved a round of negotiations with Tesla and sealing the deal at a higher valuation, third scenario includes a third party being introduced into the fray and competing with Tesla over SCTY acquisition and lastly cancellation of merger in its entirety by rejecting the bid. Regardless of the outcome, SolarCity investors should rest easy as the stock is likely to post strong growth in long term.

Ben Kallo reaffirmed the company’s buy rating and a price target of $37. The analyst opinion for the stock has five Strong Buy, three Buy, nine Hold and one Underperform rating. The stock now trades at a price of $24.56.

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