Jefferies Warns SpaceX Speculation Could Hurt Tesla Stock
Jefferies has increased its Tesla price target to $375 but continues to identify meaningful downside risks for the electric vehicle company.
The investment bank warned that growing speculation about a possible Tesla-SpaceX merger could change how investors value Tesla shares. In particular, TSLA could begin trading as an indirect tracking stock for SpaceX.
Tesla Could Become a Proxy for SpaceX
Jefferies examined the changing relationship between Tesla and SpaceX following SpaceX’s blockbuster stock market debut.
Tesla shares avoided a major sell-off before the SpaceX IPO. However, expectations that the two companies could merge may now influence investor behaviour.
According to Jefferies, Tesla shareholders may attempt to protect themselves from potential dilution by adjusting their positions ahead of a possible transaction.
As a result, TSLA shares could increasingly move according to developments surrounding SpaceX rather than Tesla’s core business performance.
SpaceX Merger Speculation Creates Valuation Risk
A stronger merger narrative could make Tesla’s price discovery process more complicated.
Tesla stock may begin reflecting SpaceX’s performance, valuation and growth expectations. Consequently, its share price could become even less connected to Tesla’s vehicle sales, profit margins and cash flow.
Jefferies’ revised $375 target suggested approximately 6% downside from the stock’s prevailing market level.
The firm also warned that Tesla’s valuation and earnings estimates remain disconnected. However, it does not expect that gap to close easily in the near term.
Robotaxis Could Initially Generate Losses
Jefferies also adopted a cautious position on Tesla’s robotaxi ambitions.
Many investors expect autonomous vehicles to become an important source of high-margin revenue. Nevertheless, launching and expanding a robotaxi network will require significant investment.
Jefferies expects the business to operate as a loss-making division during its early stages. Development costs, infrastructure spending and operational expenses could therefore weigh on Tesla’s earnings.
This outlook is more conservative than the rapid revenue growth assumed by many bullish Wall Street forecasts.
Humanoid Robots May Pressure Tesla’s Earnings
The investment bank raised similar concerns about Tesla’s humanoid robot business.
Tesla’s Optimus project could eventually become a major commercial opportunity. However, developing the technology and expanding production will likely require substantial capital before it generates meaningful profits.
Jefferies therefore expects both robotaxis and humanoid robots to create initial losses rather than immediate earnings growth.
This assumption contributed to the firm’s below-consensus financial forecasts.
Tesla’s Premium Valuation Faces a Test
Tesla trades at a considerable premium compared with traditional automakers. Investors have largely justified that valuation through expectations surrounding artificial intelligence, autonomous driving and robotics.
Jefferies did not dismiss the long-term potential of these businesses. Instead, it argued that investors may be overlooking the costly development period required before they become profitable.
The market appears focused on the potential rewards from Tesla’s future technologies. However, the company must first absorb the investment costs and operating losses associated with launching them.
Meanwhile, continued Tesla-SpaceX merger speculation could add another layer of uncertainty to Tesla’s already complex valuation.
