Tesla shares fell 4.2% to $402.90 as JPMorgan published analysis on a potential SpaceX merger. RBC Capital raised its price target to $500, citing a 25% to 30% valuation premium from the hypothetical tie-up. The stock faces its next test with second-quarter earnings on July 22.
Tesla Inc. shares fell 4.2% to $402.90 on Tuesday as JPMorgan Chase & Co. published analysis suggesting a potential merger with SpaceX carries strategic logic.
"A tie-up between Tesla and SpaceX could create a vertically integrated aerospace and automotive powerhouse," JPMorgan analysts wrote, though the firm maintained its Neutral rating and $475 price target on the stock.
The decline came despite a separate price-target upgrade from RBC Capital Markets, where analyst Tom Narayan lifted his target to $500 from $475 while keeping an Outperform rating. Narayan said the revision incorporates a 25% to 30% valuation premium tied to a hypothetical SpaceX acquisition scenario, contributing roughly 15% to the firm's intrinsic valuation calculation. Tesla delivered 480,100 vehicles in the second quarter, a 25% increase from a year earlier that beat JPMorgan's estimate of 420,000 and the Bloomberg consensus of 380,700. Yet the stock fell as much as 7% on the announcement day in a classic buy-the-rumor, sell-the-news pattern, as traders had already priced in the positive results during a pre-announcement rally.
The merger speculation provides a potential valuation floor even as near-term delivery enthusiasm fades. Tesla reports second-quarter earnings on July 22, where analysts project $25.4 billion in revenue and $0.48 per share in earnings. Baird maintained its Outperform rating with a $522 price target, while JPMorgan held at Neutral with $475. Tesla trades at a price-to-earnings multiple of 382.64, among the highest in the global auto industry, making the earnings call a critical test of whether fundamentals can support the valuation.
SpaceX, which joined the Nasdaq 100 index on Tuesday, saw its own shares fall about 7% to around $160, well off the post-IPO high of $225 set in late June. The stock's inclusion in the benchmark index is expected to drive additional fund inflows as index-tracking funds add positions. The merger thesis, while unconfirmed by either company, has gained traction on Wall Street as analysts weigh the benefits of combining Tesla's automotive and battery expertise with SpaceX's defense, satellite, and space technology exposure.
The broader market added pressure, with the Dow Jones Industrial Average falling from a record high and the tech-heavy Nasdaq Composite declining 1.2% as chip stocks sold off. Tesla was among the worst performers in the Magnificent Seven group, which otherwise traded mostly higher.
For Tesla holders, the July 22 earnings report is the next major catalyst. A guidance raise or concrete robotaxi expansion timeline — Tesla recently launched robotaxi operations in Miami — could provide the momentum needed to test the $500 level implied by RBC's target.
This article is for informational purposes only and does not constitute investment advice.
