Tesla Shares Dip on Increased Capex, But Merger Speculation Fuels Optimism
Tesla’s stock experienced a downturn following its first-quarter earnings release, largely attributed to a more substantial-than-anticipated increase in capital expenditures. However, Wall Street is abuzz with speculation that a potential merger with Elon Musk’s burgeoning rocket company, SpaceX, could provide a floor for Tesla shares in the near term. SpaceX is reportedly gearing up for an Initial Public Offering (IPO) later this year, with valuations projected to approach the $2 trillion mark.
“Our interpretation of this situation is that Musk is intensely focused on the extensive list of ongoing Tesla projects, coupled with the imminent SpaceX IPO,” stated researchers from Baird in their post-earnings analysis. “In the immediate future, we believe Tesla’s stock performance will likely be closely tied to the SpaceX IPO and the prevailing merger rumors.”
While analysts offered general commentary on the implications of the SpaceX IPO, their focus remained primarily on Tesla’s diverse project pipeline and upcoming product rollouts. Nevertheless, they cautioned against dismissing Tesla’s stock outright, given the potential upside from these developments.
Analysts at Roth echoed this sentiment in a Thursday note, observing, “In the short term, we anticipate the pending SpaceX IPO (Private) will heavily influence discussions surrounding Tesla, encompassing both direct and indirect impacts. These range from the potential number of Cybertrucks SpaceX might procure to the viability of a Tesla-SpaceX merger.”
This merger speculation has been circulating for some time on Wall Street, with some arguing that traditional valuation metrics are increasingly insufficient for a company as multifaceted as Tesla. “The rationale for merging Tesla and SpaceX will remain a central theme,” wrote analysts from Jefferies in an April 19 investor note. “Conventional valuation metrics offer limited utility, with share prices driven by sentiment, confidence in operational execution, and a sustained commitment to innovation.”
Tesla shares were trading down approximately 3% following the earnings announcement. While the stock has seen a slight pullback in 2026, it has largely stabilized around recent trading levels. Despite some headwinds in the automotive segment, Tesla’s stock remains up nearly 60% over the past 12 months.
The increased capital expenditure plans, a point of concern highlighted by Jefferies who had previously warned that “ambitious capex plans are set to create loss centers for a while,” proved to be a significant factor in the earnings call. Tesla revised its full-year capital expenditure forecast upwards to $25 billion from an initial $20 billion. Some analysts anticipate further increases in capex allocation throughout the year, which could potentially lead Tesla to experience negative free cash flow.
**SpaceX Mention on the Earnings Call Fuels Merger Talk**
During the earnings call, CEO Elon Musk addressed the operational synergies between his various ventures, particularly concerning the development of Tesla’s semiconductor fabrication project, Terafab. He highlighted the inherent complexities arising from Tesla and SpaceX operating as distinct entities, a comment that further fueled merger speculation among analysts.
“SpaceX will be handling the initial phase of the scaled-up Terafab,” Musk stated. “Any intercompany transactions require approval from both the SpaceX and Tesla boards of directors and must navigate a conflict resolution process.” He elaborated, “Unfortunately, this will involve considerable complexity as we must ensure that both Tesla and SpaceX shareholders are adequately served, striking the right balance.”
Baird researchers interpreted these comments as supportive of a potential future integration: “Musk’s remarks describing the complexity of intercompany transactions lead us to believe it strengthens the case for merging all entities over time. We anticipate that headlines and reports concerning the SpaceX IPO will likely drive TSLA shares in the near term.”
Analyst sentiment regarding Tesla’s progress across its various initiatives – including autonomous taxis, advanced driver-assistance systems, energy storage solutions, and robotics – remains mixed. “Fully self-driving take rates appear to be improving, with low cancellation rates,” commented Rob Wertheimer of Melius. However, Stifel researchers expressed reservations about Tesla’s performance in its rapidly expanding energy division, noting that “generation and storage deployment has been weak.”
Segment revenue for energy storage reached $2.41 billion, falling short of Stifel’s $3.28 billion forecast. This figure represents a 37.2% decrease from the fourth quarter of 2025 and an 11.8% decline year-over-year. In the first quarter, Tesla deployed 8.8 gigawatt-hours of energy storage, marking a sequential decrease of 38%. Despite these figures, CFO Vaibhav Taneja expressed optimism, stating, “We still expect 2026 deployments to be higher than 2025.”
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