Tesla (TSLA) shares climbed approximately 2% in early trading on Monday, outperforming a broadly weaker market as investors looked past a sharp decline in SpaceX shares and continued to focus on the electric vehicle maker's longer-term artificial intelligence ambitions. The gain came despite a 0.3% drop in the S&P 500 and a 1.1% decline in the Nasdaq Composite, while the Dow Jones Industrial Average edged up 167 points, or 0.3%.
Technology stocks broadly weighed on sentiment, with Alphabet falling roughly 6% amid concerns over high-profile AI talent departures, Amazon and Meta Platforms losing 4% and 3%, respectively, and Microsoft declining around 2%. Meanwhile, newly listed SpaceX came under pressure, falling around 8% after dropping as much as 11% earlier in the session.
Jefferies Warns Merger Narrative Could Distort Tesla Valuation
In a research note published Friday, Jefferies said the growing speculation about a potential merger between Elon Musk's two highest-profile companies could increasingly influence how investors value Tesla. The firm argued that expectations for a future combination between Tesla and SpaceX could cause Tesla shares to trade more like a tracking stock for SpaceX rather than reflecting the EV maker's standalone fundamentals.
According to Jefferies, investors may be attracted to Tesla shares if they believe owning Tesla could provide exposure to a future merged entity without suffering significant dilution. The brokerage noted that Tesla shares did not experience meaningful selling pressure ahead of SpaceX's blockbuster IPO, but warned that growing consensus around a potential merger could increasingly influence trading behavior.
"Consensus that a merger will be next and soon may turn TSLA into a tracker as shareholders try to minimize stake dilution," Jefferies wrote. The firm maintained its Hold rating on Tesla while raising its price target to $375 from $350.
Jefferies argued that Tesla already trades largely on future expectations rather than current operating performance, with investors focusing on initiatives including Full Self-Driving software, robotaxi services, and humanoid robotics. The firm cautioned that a stronger merger narrative could further disconnect Tesla's valuation from its underlying financial results. "If the merger narrative takes hold and TSLA effectively begins trading as a proxy for SpaceX's fortunes, its price discovery would become increasingly untethered from Tesla's own operating fundamentals," Jefferies said.
The brokerage also adopted a more cautious stance toward Tesla's emerging businesses, stating that its forecasts assume early deployments of robotaxis and humanoid robots will initially generate losses rather than profits.
ARK Invest Adds to Tesla Position
While some analysts remain cautious, one of Tesla's most prominent supporters increased its exposure to the stock. Cathie Wood's ARK Invest purchased 54,815 Tesla shares on Friday, according to disclosures. The firm acquired 43,998 shares for its ARK Innovation ETF and another 10,817 shares for its ARK Next Generation Internet ETF.
Tesla remains ARK Innovation's largest holding, representing approximately 9.7% of the portfolio, and is the second-largest holding in the ARK Next Generation Internet ETF, accounting for roughly 7.9% of assets. Wood has long been among Tesla's most bullish investors and has previously projected a price target of $2,600 for the stock by 2029.
For more on ARK Invest's recent moves, see ARK Invest Boosts Tesla, Snowflake Stakes; Slashes Roku Position in AI-Focused Portfolio Shift. The ongoing merger speculation is explored in SpaceX IPO Complete: Tesla Merger Talk Intensifies as $3.7T Giant Looms.
This article is for informational purposes only and does not constitute financial advice.
