Tesla's shares advanced more than 5% on Monday, buoyed by a Barclays upgrade that highlighted the potential for a merger with SpaceX and a more favorable outlook for the company's core businesses.
Analyst Dan Levy raised Tesla to Overweight from Equal Weight and lifted his price target to $450 from $370, implying roughly 19% upside from the stock's recent levels. The upgrade follows confirmation from CEO Elon Musk that Tesla and SpaceX have formed independent committees to explore a possible combination. Musk called the merger a “good idea” but cautioned that no agreement is guaranteed.
SpaceX merger prospects drive Barclays upgrade
Barclays believes the prospect of a merger could support Tesla shares, partly due to the potential takeover premium for shareholders. “With a combination heavily expected, and with expectation for some premium to Tesla stock, we believe this should drive upside for the stock,” Levy wrote.
A combined entity would bring together artificial intelligence capabilities, semiconductor manufacturing, robotics, and connectivity operations. Yorkville analyst Dan Ives also views a potential merger as strategically significant, noting that SpaceX's recent $40 billion debt financing for GPUs would expand its computing infrastructure and strengthen its competitive position against major cloud providers. Ives estimates an 80% to 90% chance of a merger by the end of 2027 and believes a deal would require a Tesla share price above $500.
Automotive growth, FSD, and energy storage outlook
Barclays' more constructive stance also reflects expectations for improvement in Tesla's core automotive business. The company reported third-quarter revenue of $28.05 billion, above LSEG estimates of $27.88 billion. Adjusted earnings came in at $0.48 per share, down from $0.50 a year earlier but ahead of Wall Street expectations. Vehicle deliveries declined 2% to 486,532 units.
Despite the mixed results, Levy expects automotive growth to resume in 2026, with further improvement in 2027. He cited demand supported by Full Self-Driving (FSD) and increasing exports from Tesla's Shanghai factory. Tesla reported 1.74 million FSD users at the end of the third quarter, up from 1.04 million a year earlier, and more than 75% of new vehicles delivered in North America included FSD subscriptions.
Barclays also projects Tesla's energy storage shipments to increase by more than 50% in 2027, driven by demand from data centers. The company has also made progress in its Robotaxi business, with cumulative unsupervised Robotaxi miles increasing eightfold during the third quarter, although the rollout has been slower than initially expected.
Investors weigh growth opportunities against risks
Tesla's shares have faced pressure this year as investors assess profitability and the time required for newer businesses to contribute meaningfully to earnings. Although sales have increased approximately 13% so far this year compared with 2025, operating income has declined around 30% year over year.
The potential SpaceX merger offers another source of investor interest, but its outcome remains uncertain. Tesla's valuation will also depend on whether its automotive operations recover and whether autonomous driving, robotics, and energy storage can deliver sustainable growth.
This article is for informational purposes only and does not constitute financial advice.
