Key Takeaways
- TSLA shares started Monday trading at $342.27, representing a 24% decline year-to-date prior to the session
- Merger speculation between Tesla and SpaceX is becoming a significant pricing factor on Wall Street
- According to RBC’s Tom Narayan, the combination would form a “vertical-integration-from-orbit-to-ground-AI ecosystem”
- Q2 results showed revenue exceeding expectations at $28.24 billion, while EPS of $0.33 fell short of the $0.50 analyst consensus
- Zevenbergen Capital reduced its TSLA holdings by 0.6%, despite maintaining it as a top-three portfolio position
Shares of Tesla began Monday’s session at $342.27, posting a 0.3% increase during early market hours, as SpaceX stock advanced 0.9% to reach $141.29. S&P 500 futures showed a 0.2% gain during the same timeframe.
A notable correlation has emerged between these two equities, with both moving in tandem approximately two-thirds of the time during recent weeks. The stocks posted consecutive weekly gains heading into Monday’s session, following synchronized losing streaks in prior periods.
This increasing correlation stems from a single catalyst: consolidation speculation. Market participants are assigning higher probability to Elon Musk merging his automotive and aerospace ventures, a dynamic that’s actively influencing TSLA’s trading behavior.
Tom Narayan from RBC Capital Markets outlined the rationale in a July research note. His analysis suggests the combined entity would establish a “vertical-integration-from-orbit-to-ground-AI ecosystem,” leveraging Starlink’s global network, Tesla’s autonomous vehicle and robotics divisions, and SpaceX’s satellite-based computing capabilities.
According to Narayan’s assessment, SpaceX would likely need to provide Tesla shareholders with a premium valuation to facilitate the transaction, though specific figures weren’t disclosed.
Brett Winton, serving as Chief Futurist at ARK Invest, recently suggested such a merger announcement could materialize within the current calendar year. ARK maintains equity positions in both corporations.
Quarterly Results Fall Short on Bottom Line
Tesla’s latest quarterly performance delivered contrasting signals. The company generated $28.24 billion in Q2 revenue, surpassing the $26.42 billion consensus projection and marking a 25.5% year-over-year increase.
However, earnings per share registered at $0.33, significantly underperforming the $0.50 consensus forecast. The company’s net margin stood at 3.67%, while return on equity measured 3.82%.
Current analyst projections anticipate full-year EPS reaching $0.88. Based on these expectations, TSLA currently trades at approximately 317 times earnings, representing an elevated multiple that offers limited downside protection.
Institutional Portfolio Adjustments
During Q2, Zevenbergen Capital decreased its TSLA stake by 0.6%, divesting 3,072 shares to conclude the period holding 534,122 shares valued at approximately $224.7 million. The position continues to represent 5.1% of Zevenbergen’s total portfolio and maintains its status as the firm’s third-largest investment.
Conversely, Vanguard expanded its Tesla holdings by 2.6% in Q4, while Norges Bank initiated a substantial new position valued at roughly $17.1 billion. Amundi increased its stake by 14% during Q1. Collectively, institutional investors and hedge funds control 66.2% of outstanding shares.
Chief Financial Officer Vaibhav Taneja divested 2,606 shares on June 8th at $402.20 per share, generating proceeds of approximately $1.05 million. The transaction was executed to satisfy tax liabilities associated with vesting equity compensation.
Recent analyst price objectives span from $445 to $500. JPMorgan reduced its target from $475 to $445 with a neutral stance on July 23rd, whereas RBC preserved its $500 objective alongside an outperform recommendation. The consensus target averages $401.74, accompanied by an aggregate “Hold” rating derived from 21 buy recommendations, 19 hold ratings, and 4 sell calls.
Tesla’s 52-week trading range extends from $297.38 to $498.83, with the 50-day moving average positioned at $370.77.
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