In the wake of the approval of the Dollar Tree Inc. (NASDAQ: DLTR) and Family Dollar merger, analysts and investors alike are trying to discern what direction this newly combined company will be headed. One key analyst sees a rocky road ahead and actually sees the stock underperforming in the near future.

Credit Suisse downgraded Dollar Tree to an Underperform rating from Neutral and its price target to $60 from $70. This implies downside of 10% from current prices.

The firm remains cautious on Dollar Tree’s acquisition of Family Dollar given concerns about execution risk, management’s ability to turn around this perennially poor performing asset and its overall strategic fit. While the stock has pulled back recently on disappointing Family Dollar results and slowing core Dollar Tree momentum, Credit Suisse believes further downside is likely.

Credit Suisse’s proprietary earnings bridge highlights more earnings risk. While challenges in modeling the combined company may be partly to blame for high consensus estimates, the brokerage firm also believes the street may be underestimating the possible investment needed at Family Dollar to improve longer-term results.

As a result, Credit Suisse cut its earnings estimates to better reflect updated thoughts on Family Dollar’s impact. The firm lowered its 2015 earnings per share (EPS) estimate to $2.80 from $2.88, 2016 estimate to $3.48 from $3.90, and the 2017 estimate to $4.38 from $4.70.

The brokerage firm said in its report:

Family Dollar deal off to a disappointing start. While management remains positive on the Family Dollar acquisition overall, it’s clear to us the transaction is not living up to initial expectations. Family Dollar’s most recent results were disappointing, Dollar Tree uncharacteristically failed to provide visibility on second half 2015 earnings, and management was unwilling to endorse its previous first full year accretion guidance. The company’s emphasis on the need for near-term investment in the business in areas like payroll suggests that Family Dollar’s earnings may actually need to rebase temporarily before the company can rebuild profitability; an issue not initially contemplated by most investors.

Shares of Dollar Tree traded down 2.2%, at $66.42 Thursday morning, in its 52-week trading range of $53.70 to $84.22. The stock has a consensus analyst price target of $82.86.

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