Barclays Upgrades Tesla to Overweight on SpaceX Merger Prospects

Barclays has upgraded Tesla (TSLA) to Overweight from Equal Weight and raised its price target to $450 from $370, citing the increasing likelihood of a merger with SpaceX. In a note to clients, the bank's analyst said the potential combination is now "a key part of the Tesla bull case," a sentiment that helped push Tesla shares up approximately 2% in premarket trading Monday.

Merger Thesis Gains Traction

Barclays analyst Dan Levy stated that a merger is "heavily expected," and this anticipation should drive upside for the stock through a potential takeover premium. The note also suggests the merger narrative limits downside risk, as investors are unlikely to short the stock ahead of a formal announcement. The bank's view follows CEO Elon Musk's disclosure on a SpaceX earnings call last week that both companies had formed special committees to explore a combination, stating there was "a lot of merit" to the idea.

Levy views an all-stock acquisition of Tesla by SpaceX as the most probable structure, largely due to SpaceX's dual-class share framework. Such a deal would help Musk achieve his stated goal of increasing his Tesla ownership from roughly 20% to around 25%. Based on Musk's approximate 48% ownership and 82% voting power in SpaceX, Barclays estimates he could command about 53% of the total voting power in a combined entity.

Core Business Fundamentals Improving

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Beyond the merger speculation, Barclays highlighted strengthening trends in Tesla's core operations. The analyst noted several positive developments from the company's recent earnings call:

• Auto Business: On track to return to growth this year after two years of declines, with further upside projected for 2027 from Full Self-Driving (FSD) demand and rising exports from Giga Shanghai.
• Energy Division: The energy business is reportedly "nearly sold out for 2027" amid strong demand from data centers, which could support shipment growth of over 50%.
• Robotaxi Inflection: After a slow start following its June 2025 launch, Barclays has observed a "sharp inflection in Robotaxi miles driven." This coincides with FSD adoption rates exceeding 75% on new vehicles sold in North America during the third quarter.

Path to a Deal

While Barclays sees the deal as "effectively settled," it would still face significant hurdles. Any transaction would require approval from more than 50% of the total outstanding voting power at each company. Barclays described this as a "high hurdle," a point Musk himself acknowledged on last week's call. The potential for a deal, however, is now seen by the bank as a primary catalyst for the stock's performance.