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.
"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," research analyst John Murphy said in a note to investors. He has an underperform rating on the stock.
Murphy sees Tesla shares falling to $165, a 46 percent drop from where the stock closed Monday at $308.03 a share. Shares were unchanged in premarket trade.
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.
In November, SolarCity and
Elon Musk is chairman and CEO of
Here are some of Murphy's other concerns about the combined Tesla-SolarCity:
— CNBC's Robert Ferris contributed to this report.