> ## Content Index > Fetch the complete content index at: https://brief.sharpertrades.com/llms.txt > Use this file to discover other available public pages before exploring further. # Tesla's SpaceX Merger Prospects and Improving Core Business Drive Stock Rally - URL: https://brief.sharpertrades.com/teslas-spacex-merger-prospects-and-improving-core-business-drive-stock-rally/ - Published: 2026-10-26T15:02:18.000Z - Updated: 2026-10-26T15:02:18.000Z - Description: Tesla shares rallied after Barclays upgraded the stock to Overweight, citing a potential SpaceX merger, recovering automotive growth, strong energy storage demand, and accelerating Full Self-Driving and Robotaxi adoption. - Author: Luca Moschini - Tags: Business Trends, Innovation & Tech, Price Action ### Barclays Sees Multiple Growth Drivers Behind Tesla's Latest Rally Tesla (TSLA) shares climbed more than 6% on Monday, October 26, after Barclays upgraded the electric vehicle maker to Overweight from Equal Weight and raised its price target to $450 from $370. The upgrade reflects more than speculation about a potential merger with SpaceX (SPCX). Barclays sees improving fundamentals across Tesla's automotive, energy storage, and autonomous driving businesses, creating several potential drivers of future growth. However, the proposed merger remains uncertain, and Tesla still faces pressure on profitability. --- ### Key Points - Barclays upgrades Tesla: The firm raised its price target to $450, citing improving core operations and potential upside from a SpaceX merger. - Automotive, energy, and software show encouraging trends: Barclays expects vehicle sales to return to growth, energy storage shipments to expand, and Full Self-Driving adoption to strengthen. - Merger uncertainty and profitability remain important: Tesla and SpaceX are exploring a combination, but no agreement has been reached, while Tesla continues investing heavily in autonomous driving and robotics. --- ## Barclays Upgrade Reflects More Than a Potential SpaceX Merger Tesla's latest rally followed a more favorable assessment from Barclays analyst Dan Levy, who upgraded the stock to Overweight from Equal Weight. Levy raised his price target to $450, pointing to improving business trends and the possibility that a combination with SpaceX could provide additional value for Tesla shareholders. The merger discussions have become an important part of the company's market narrative. Last week, Elon Musk confirmed that Tesla and SpaceX had established independent committees to explore a potential combination. Musk described the idea favorably, highlighting opportunities to bring together artificial intelligence, robotics, semiconductor manufacturing, and connectivity. Barclays believes a merger is becoming increasingly expected and could involve a premium for Tesla shareholders. However, Musk has emphasized that a transaction is not certain. That distinction is important. Although merger expectations are contributing to Tesla's stock performance, the companies have not announced a formal agreement. ### Why Tesla Outperformed Other Electric Vehicle Stocks Tesla's rally was notably stronger than the broader electric vehicle industry. While Tesla shares advanced more than 6%, Lucid Group (LCID) and Rivian Automotive (RIVN) declined. The Global X Autonomous & Electric Vehicles ETF (DRIV) posted only a modest gain. This divergence suggests investors were responding to developments specific to Tesla rather than a broad improvement in demand for electric vehicle stocks. Unlike its smaller competitors, Tesla operates across vehicle manufacturing, energy storage, autonomous driving software, and Robotaxi services. Those businesses are central to Barclays' increasingly positive assessment. ## Why Does Barclays Expect Tesla's Core Business to Improve? Although the SpaceX discussions are attracting attention, Barclays' upgrade also rests on expectations that Tesla's existing businesses are gaining momentum. The firm sees improving conditions in automotive sales, growing demand for energy storage, and stronger adoption of autonomous driving technology. ### Automotive Growth Could Return After Two Years of Declines Barclays expects Tesla's automotive business to return to growth in 2026 following two years of declines, with further improvement anticipated in 2027. The firm identifies two principal drivers: growing demand supported by Full Self-Driving software and higher vehicle exports from Tesla's Giga Shanghai factory. Tesla's latest quarterly results presented a mixed picture. Third-quarter revenue reached approximately $28 billion, while adjusted earnings were $0.48 per share. Vehicle deliveries declined slightly from the previous year, and operating profits remained under pressure. Nevertheless, Barclays believes the automotive business is showing signs of improvement. The firm's outlook suggests that Tesla's growth prospects increasingly depend on the relationship between its vehicles and software offerings, rather than vehicle sales alone. ### Full Self-Driving Adoption Strengthens Full Self-Driving, or FSD, has become an increasingly important part of Tesla's business. The company reported 1.74 million FSD users at the end of the third quarter, up from 1.04 million a year earlier. Barclays also highlighted that more than 75% of newly purchased Tesla vehicles in North America included FSD subscriptions during the third quarter. That adoption rate is significant because it demonstrates growing customer participation in Tesla's software ecosystem. FSD provides a recurring subscription revenue opportunity alongside traditional vehicle sales. Barclays believes stronger adoption could support automotive demand while expanding Tesla's software business. ### Energy Storage Demand Extends Beyond Electric Vehicles Tesla's energy business is another important component of the Barclays upgrade. The firm noted that Tesla's energy storage business is nearly sold out for 2027, reflecting strong demand for its products. Barclays expects energy storage shipments could grow by more than 50% in 2027, supported partly by expanding data center demand. Tesla's energy division has also reported improving profitability, with gross margins reaching 33.1%. These developments highlight the growing role of energy storage within Tesla's broader operations. While electric vehicles remain central to the company's business, energy storage provides an additional growth opportunity tied to electricity infrastructure and data center investment. ### Robotaxi Activity Shows Signs of Acceleration Barclays also sees improving momentum in Tesla's Robotaxi business. The company reported that cumulative unsupervised Robotaxi miles increased eightfold during the third quarter, approaching 2 million miles. Its Cybercab joined the unsupervised fleet in Austin in September, while management identified Dallas as the next planned expansion market. Barclays believes the sharp increase in miles driven signals that Robotaxi activity is beginning to accelerate following a slower-than-expected rollout. Tesla is targeting meaningful Robotaxi profitability in 2027. However, that financial contribution has not yet appeared in reported results. The distinction between operational progress and realized profitability remains important as Tesla continues expanding its autonomous driving services. ## What Comes Next for Tesla and the SpaceX Merger? Tesla now faces two separate developments that could influence its market valuation. The first is the outcome of its merger discussions with SpaceX. The second is whether improving business activity translates into stronger financial performance. ### Merger Discussions Remain Preliminary The independent committees established by Tesla and SpaceX are evaluating a possible combination, but neither company has announced a final agreement. A merger could bring together operations involving electric vehicles, autonomous driving, robotics, satellite connectivity, and AI infrastructure. Barclays believes the potential transaction could provide additional upside for Tesla shareholders. However, if discussions fail to produce an agreement, the merger-related premium reflected in Tesla's stock price could diminish. For now, the proposed combination remains a possibility rather than a confirmed corporate transaction. ### Profitability Remains an Important Challenge Tesla's growth initiatives require substantial investment. Despite improving revenue trends and expanding technology operations, the company's operating income has declined. Tesla also reported weaker free cash flow during the third quarter, while management expects approximately $20 billion in capital expenditures this year. Those investments support the company's efforts in autonomous driving, robotics, and infrastructure expansion. However, they also place pressure on near-term financial results. Tesla continues to trade at a significantly higher earnings multiple than traditional automakers such as General Motors (GM). That valuation reflects expectations for future growth from software, autonomous driving, robotics, and energy storage. Whether those businesses can deliver stronger earnings and cash flow will remain an important measure of Tesla's progress. ### Barclays Sees an Improving Balance of Opportunities and Risks Barclays' upgraded outlook reflects several developments occurring simultaneously. The firm expects automotive growth to recover, FSD adoption to continue expanding, energy storage demand to remain strong, and Robotaxi activity to gain momentum. A possible SpaceX merger adds another potential source of value. Together, Barclays believes these factors create a more favorable balance between potential returns and risks for Tesla shares. Still, some of those expectations depend on future operating results, while the merger remains unresolved. --- ## What It Means for Investors Tesla's October 26 rally highlights how investor expectations are shifting beyond the company's traditional electric vehicle business. Barclays' upgrade reflects growing attention to Tesla's software, autonomous driving, energy storage, and potential corporate combination with SpaceX. Importantly, the firm's positive assessment does not depend entirely on the merger. Its expectations for automotive recovery, strong energy demand, and greater Robotaxi activity provide a separate operating argument for the company. Nevertheless, Tesla's financial results have not yet fully reflected the profitability expected from several of these initiatives. The company continues to invest heavily, while operating income and free cash flow remain under pressure. That creates a distinction between improving business activity and the earnings needed to support Tesla's valuation. The potential SpaceX merger adds another layer of uncertainty because its outcome, structure, and potential shareholder benefits have not been established. For investors following Tesla stock, the most important developments will be whether automotive growth returns, FSD and Robotaxi adoption continue expanding, energy demand translates into revenue, and the merger discussions progress toward an agreement. ## Conclusion Tesla's latest rally reflects renewed confidence in the company's growth prospects following Barclays' upgrade to Overweight and its higher $450 price target. The potential SpaceX merger is an important part of that outlook, but it is not the only factor. Barclays also sees improving automotive fundamentals, stronger Full Self-Driving adoption, substantial energy storage demand, and accelerating Robotaxi activity. These developments suggest Tesla's market narrative is increasingly shaped by businesses extending beyond electric vehicle manufacturing. However, profitability, investment spending, and merger uncertainty remain important considerations. Tesla's next challenge will be demonstrating that its expanding operations can deliver stronger financial results while the potential SpaceX combination takes shape. --- ## FAQs ### Why did Tesla stock rise on October 26, 2026? Tesla shares rose more than 6% after Barclays upgraded the stock to Overweight and raised its price target to $450\. The firm cited improving automotive fundamentals, strong energy storage demand, expanding Full Self-Driving adoption, Robotaxi momentum, and potential upside from a SpaceX merger. ### Is Tesla merging with SpaceX? Tesla and SpaceX have formed independent committees to explore a potential merger. Elon Musk has confirmed the discussions but emphasized that an agreement is not certain. ### Why did Barclays upgrade Tesla stock? Barclays expects Tesla's automotive business to return to growth, supported by Full Self-Driving adoption and higher exports from Giga Shanghai. The firm also highlighted strong energy storage demand, accelerating Robotaxi activity, and the possibility of additional value from a SpaceX combination. ### How strong is demand for Tesla's Full Self-Driving and energy storage products? Tesla reported 1.74 million Full Self-Driving users at the end of the third quarter, with more than 75% of newly purchased vehicles in North America including FSD subscriptions. Barclays also noted that Tesla's energy storage business is nearly sold out for 2027, with shipments potentially growing more than 50%. ### What are the main uncertainties facing Tesla? The main uncertainties include whether the SpaceX merger proceeds, whether automotive growth returns as expected, and whether Robotaxi operations generate meaningful profits. Tesla also faces pressure on operating income and free cash flow as it continues investing in autonomous driving, robotics, and infrastructure. *This article was created with AI assistance and reviewed by an editor. For details, please refer to our* [*Terms of Use*](https://sharpertrades.com/p/terms?ref=brief.sharpertrades.com)*.* --- ### Go Beyond the Market Brief with Market Edge Follow SharperTrades’ complete approach to trading and investing, combining active trade opportunities through Block Orders, long-term research through Stock Investor, and structured market education through the Swing Trading Masterclass.[*Try Market Edge for $19 your first month →*](https://sharpertrades.com/p/market-edge?coupon%5Fcode=MB19&ref=brief.sharpertrades.com) ### Explore Research with Stock Investor [*Stock Investor*](https://sharpertrades.com/p/stock-investor/?ref=brief.sharpertrades.com) is SharperTrades’ platform for long-term investing research and portfolio management. Members receive research reports, portfolio updates, conviction tracking, and in-depth analysis designed to support disciplined investment decisions. ### Explore Active Trading & Income Strategies [*Block Orders*](https://sharpertrades.com/p/block-orders?ref=brief.sharpertrades.com) tracks institutional activity and highlights active trade setups and price behavior across long and short opportunities. For options-focused traders, [*Essential Option Income*](https://sharpertrades.com/p/option-alert-trading-signal?coupon%5Fcode=MB1&ref=brief.sharpertrades.com) provides a structured approach to options income strategies, while [*Pro Option Trader*](https://sharpertrades.com/p/pro-option-alert-trading-signal?coupon%5Fcode=MB19&ref=brief.sharpertrades.com) offers a broader range of options strategies and trade opportunities. ### Think More Clearly with SteadyCapital [SteadyCapital](https://studio.com/luca/steadycapital?c=fVDR9OI2&ref=brief.sharpertrades.com) is SharperTrades’ decision-support system for long-term investors, built around the SteadyCapital Method™. Review investment ideas, challenge assumptions, evaluate valuation and risk, compare companies, and think through important buy, hold, add, trim, or sell decisions before you act. ### Risk Disclosure All content is provided for educational purposes only and does not constitute investment advice. Trading involves risk, and past performance is not indicative of future results. Please review our full [Risk Disclosure](https://sharpertrades.com/p/risk-disclaimer?ref=brief.sharpertrades.com) for additional information.