A Summary Of Elon Musk's Acquisition Conference Call

On a conference call, Tesla Motors Inc (NASDAQ: TSLA) management indicated that with the acquisition of SolarCity Corp (NASDAQ: SCTY), the company would be able to significantly lower overall costs and become a provider of complete energy solutions. Investors continue to be concerned about the acquisition changing Tesla’s business model and becoming another drag on cash flows, Baird’s Ben Kallo said in a report.

Kallo maintained an Outperform rating for the company, with a price target of $338, saying that while shares could be under pressure in the near term, they offer significant upside for long-term investors.

Related Link: Tesla Downgraded By Morgan Stanley, Cuts Target By $88; Rated Overweight Since 2012

Cost And Offering

Elon Musk noted that Tesla’s manufacturing expertise could significantly lower SolarCity’s panel production costs, and “allow the company to be a cost leader for solar modules,” while also enhance Tesla’s Powerwall and Powerpack products “by designing a full system optimized to work with SCTY’s panels,” Kallo wrote.

Cash Flow

Musk also indicated that SolarCity’s non-recourse debt was largely covered by project cash flows and that the company was on track to becoming cash flow positive by yearend 2016.

“Overall sentiment seems to be negative from TSLA shareholders and we believe TSLA management has lost some credibility following its recent equity raise,” the analyst commented.