Expectations for merger with SpaceX (SPCX.US) continue to rise; Wall Street bearish sentiment towards Tesla (TSLA.US) hits lowest level in over 11 years.

According to Zhitong Finance APP, as the potential merger between Tesla (TSLA.US) and SpaceX (SPCX.US) draws closer to reality, Wall Street analysts are rapidly turning bullish on the electric vehicle manufacturer. Data shows that the proportion of analysts assigning a "sell" rating to Tesla has dropped to its lowest level in more than 11 years, with the market full of anticipation for the valuation boost that a possible merger of the two companies could bring.

Last week, BNP Paribas and CLSA successively removed their "sell" ratings on Tesla, upgrading the ratings to "neutral" and "hold," respectively. Barclays joined the bullish camp on Monday, lifting its rating from the equivalent of "hold" to the equivalent of "buy." Driven by market optimism, Tesla shares rose 5.2% on Monday.

Barclays analyst Dan Levy stated in a research report, "The anticipated merger has now become a key bullish logic for Tesla, as it provides upside potential for the stock."

Expectations of a Tesla-SpaceX merger have heated up significantly in recent weeks. Last Tuesday evening, Musk revealed that the two companies' boards had each formed special committees to study the potential benefits of a deal. In fact, ever since SpaceX was listed in June this year, Wall Street has been closely watching the possibility of a merger between these two core Musk-owned companies. As both sides formally begin feasibility assessments, the potential merger is being factored into Tesla’s valuation models more actively.

BNP Paribas analyst James Picariello pointed out that the potential merger is now the primary factor affecting Tesla’s valuation. Although he remains cautious about Tesla’s cash burn rate and the progress of its AI business, considering the increased likelihood of SpaceX acquiring Tesla, he raised his price target from $266 to $420. Picariello emphasized that this price target revision is entirely based on the higher probability of a SpaceX acquisition of Tesla, not on any improvement in Tesla’s existing business fundamentals.

Zacks Investment Research strategist Andrew Rocco commented that if the two companies eventually decide to move forward with the merger, the respective special committees would still need to negotiate transaction terms and ensure the deal is in the best interests of their shareholders. He estimates that if the transaction includes a 25% premium, Tesla stock could potentially reach about $500 per share.

The shift in Wall Street analyst ratings also reflects a change in market sentiment. According to data, of the 60 analysts currently tracking Tesla, only 5 have a "sell" rating, accounting for about 8.3%, the lowest since early 2015. In contrast, on January 1 this year, 15 out of 71 analysts still rated it a "sell," accounting for about 21.1%.

However, it is noteworthy that while the proportion of bearish analysts on Tesla has continued to decline this year, the proportion of overtly bullish analysts has not increased to the same extent. This means that some analysts are moving from a pessimistic stance to a wait-and-see attitude, rather than fully turning optimistic.

In terms of stock performance, Tesla has still lagged behind the broader market this year. As of Monday, Tesla shares were down about 13% year-to-date, while the S&P 500 rose roughly 12% over the same period.

Analysts note that Tesla has long set ambitious technological and commercialization goals, but the actual progress of some projects often lags behind previous commitments, making it difficult for investors to judge when its AI business can truly translate into significant profits.

Even without considering the potential merger, Tesla itself is in the midst of a major strategic transformation. Musk is trying to shift Tesla from a traditional electric vehicle manufacturer to a leading company in physical AI, focusing on the development of Robotaxi, humanoid robots, and related AI technologies.

Meanwhile, SpaceX is also actively expanding its AI business. Earlier this year, SpaceX already integrated Musk’s AI company xAI into its business ecosystem and has cooperated with Tesla in special engineering projects such as the Terafab chip manufacturing initiative and the next-generation Roadster sports car.

The market believes that if Tesla and SpaceX eventually merge, they could form a technology giant spanning electric vehicles, autonomous driving, robotics, aerospace, satellite communications, and AI infrastructure.

According to relevant estimates, the combined company could be valued at around $3.6 trillion, creating a massive AI industry group led by Musk. However, whether the potential transaction can ultimately be reached, as well as issues regarding deal structure, valuation, and shareholder interests, remain uncertain.

On the fundamentals side, Tesla's third-quarter profit announced last week exceeded Wall Street expectations, but the company lowered its full-year spending forecast for 2026, sparking some investor concerns about whether its AI strategic investments are sufficient, resulting in stock price fluctuations.

Nevertheless, Barclays analyst Levy believes Tesla’s latest earnings report still delivers several positive signals, particularly the progress in its core automotive business and Robotaxi business, which are expected to support the stock price.

With the potential merger now serving as a new valuation catalyst, Wall Street’s investment logic regarding Tesla is changing. Compared to focusing solely on electric vehicle sales and profit margins, investors are now increasingly emphasizing the potential synergies between Tesla and SpaceX in AI, chips, robotics, and aerospace technology.

Until the deal is formally concluded, whether Tesla can achieve its AI business growth targets, and whether the potential merger can truly create value for shareholders, will remain key factors determining its long-term stock performance.