Oppenheimer analyst on Tesla-SolarCity merger: It’s not a good use of capital

SolarCity employees unload solar panels from a truck during a home installation in Kendall Park, New Jersey.
Michael Nagle | Bloomberg | Getty Images

Oppenheimer senior analyst Colin Rusch discussed the future of Tesla and whether a shift in the government's view on autonomous driving could impact the automaker's value.

Rusch referenced a mandate released by the National Highway Traffic Safety Administration that announced plans for research on safety issues and state recommendations related to the testing, licensing and regulation of "autonomous" or "self-driving" vehicles.

Rusch said he wasn't surprised by the mandate and understands the NHTSA's goal of appropriately regulating the emerging technologies to ensure driver safety.

NHTSA expects for the first phase of its research to be completed within the next four years.

Within that time, it is possible for the government's view of autonomous driving to shift to a more hard-line approach and consequently affect Tesla's stock value.

Rusch said he considers that potential shift as low-risk to Tesla. "I think people are buying the product for how it performs, not for that one future. ... Our real concern is around potential saturation on the high end." As Tesla introduces more low-end vehicles, Rusch said he plans to focus on the margins of those products.

Another Tesla event that could impact the company's stock value is Elon Musk's plan to merge Tesla and SolarCity.

On Wednesday, Tesla's CEO told The Wall Street Journal that he expects a two-thirds majority of shareholders to vote in favor of the company's proposed merger with SolarCity. Musk has aggressively advocated for this position, assuring that synergies exist between the two companies.

"We've taken a hard look ourselves in terms of what we think the possible synergies are. We still don't think [the merger] a good use of capital," Rusch said. "We're looking for real generation of cash flow from [Tesla] … hitting the production and shipment number as well as the refinance numbers on the SolarCity side," said Rusch.