Tesla Bulls Eying Merger Bump Find Stock Needs More Than Rockets

Tesla Inc. investors hoping clarity on a potential merger with SpaceX would jolt the stock out of its lethargic ride may have to wait longer.

A day before the electric vehicle maker was set to disclose its third-quarter earnings, Elon Musk said Tesla and Space Exploration Technologies Corp. have set up committees to explore a long-rumored merger. While a deal remains far from certain, and Tesla has yet to prove it can deliver on its high-flying artificial intelligence ambitions, it’s the kind of news investors have said could reignite interest in the stock.

Musk will have a chance to offer more details on the plans to combine the company’s electric cars and robotics businesses with SpaceX’s rocket launch, AI and satellite internet operations on Wednesday evening. But absent additional color on how the combination can deliver on the company’s AI promise or evidence that its physical products are close to turning a profit, investors see little reason for the stock to shake off the recent malaise.

The EV maker could use the boost: the stock has dropped 17% in 2026, in contrast with a 13% gain in the S&P 500 over the same period, and is on track for its worst year since 2022.

Musk’s announcement is “a confirmation of the least kept secret out there,” said Dave Mazza, chief executive officer of Roundhill Investments, which owns both Tesla and SpaceX shares. “That said, now the details will matter.”

While the tie-up has been on investors’ minds since before SpaceX went public in June, the financial and regulatory mechanics of a merger remain murky. Without those details, it’s difficult to discern how much Tesla stands to benefit. Shares rose less than 2% in extended trading after Musk’s comments Tuesday.

The relatively muted response shows that the merger prospect has been largely priced in, according to Nicholas Colas, cofounder of DataTrek Research.

“You can’t play games around a merger that would make a company worth $3 trillion,” Colas said. Tesla’s earnings report “will be less relevant than how they describe the progress of the overall business. It needs to be consistent with SpaceX, so the combined company feels like an organic whole.”

Chatter around the potential combination has crescendoed in recent weeks after a gravity-defying vehicle demonstration highlighted the engineering synergies between Tesla and SpaceX.

Read More: Tesla-SpaceX Deal News Possible This Year, Barclays Analyst Says

On Tesla’s last earnings call in July, Musk said that “there’s more and more overlap” between the businesses. At the time, his expansive spending goals sent Tesla’s stock tumbling, slicing off a fifth of the company’s market value in just five days. But Tesla’s share price has rebounded since then to trade around the same levels it did before the rout.

Progress in the merger talks is likely to beat any updates on Tesla’s AI efforts. The company’s self-driving Cybercab has hit the streets and a limited pilot program of its Optimus robot is on the assembly line. But proof that the ventures can generate and sustain revenue is quarters away, according to Mazza.

Despite car sales between July and September topping expectations, Tesla’s core business has stumbled in recent years. Musk has pitched physical AI efforts as the key to unlocking greater revenues and to some extent, analysts and investors have bought into his vision. Tesla’s sell calls have dwindled and shares trade at 176 times forward earnings, making it the priciest stock in the S&P 500.

Read More: Tesla Chart Watchers Eye $400-Mark as Key Level for Breakout

But the focus on future growth potential has come with atrophying expectations for near-term execution. Annual profit estimates for 2026 have sunk almost 30% since this time last year, when AI aspirations were powering a rally in shares.

The Austin-based firm is estimated to report third-quarter earnings of 44 cents per share, a 12% drop from the year-ago quarter, according to Bloomberg consensus estimates. Capital expenditure is expected to balloon by more than 250%, and investors and analysts are eyeing free cash flow and margins to assess whether the company is doing enough to offset its massive spending.

Tesla shares have slumped the day after earnings for the past three quarters in a row. If the stock closes lower Thursday, it will be the second time since at least 2015 that traders have sold the news on four consecutive reports.

Vikram Rai, portfolio manager and macro trader at First New York, said the same future hopes that restrict Tesla’s gains are also keeping the stock from falling. He sees it stuck in a roughly $425 to $350 trading range.

“The merger talk gives the stock a floor and the slow pace of robotaxi and Optimus monetization gives it a ceiling, which is why Tesla has spent most of this year trading in a range instead of trending,” Roundhill’s Mazza said.