NEW YORK (TheStreet) -- Tesla Motors (TSLA) - Get Tesla Inc Report stock was downgraded to "perform" from "outperform" at Oppenheimer after the electric car maker offered to buy SolarCity (SCTY) for $2.8 billion late yesterday.
Shares of Tesla are falling 11.12% to $195.20 in pre-market trading on Wednesday.
"While we remain bulls on the solar industry, we do not view this acquisition as the best and highest use of TSLA's capital and human resources given the potential return on capital possible in the electricity industry (typically ~8%-9%) versus the potential leverage of the TSLA auto platform which we believe could demonstrate ROIC of 15%-20%+," the firm wrote in an analyst note.
Oppenheimer also removed its $385 price target on Tesla as it believes uncertainty around the acquisition and the resulting corporate structure will weigh heavily on the stock.
"We expect a robust shareholder fight over this acquisition centered on corporate governance," the firm added.
After yesterday's market close, Tesla offered to pay $26.50 to $28.50 per share for the solar energy company, which represents a premium of 21% to 30% of SolarCity's closing price of $21.19 on Tuesday.
"We struggle to see the benefit to TSLA other than potential leverage on its retail stores," Oppenheimer said.
Shares of SolarCity are spiking 14.44% to $24.25 in pre-market trading on Wednesday.
Separately, TheStreet Ratings Team has a "Sell" rating with a score of D+ on Tesla stock.
The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: TSLA