'By Tesla': Barclays after Musk calls Tesla-SpaceX merger a ‘good idea’

​Barclays has issued a new bullish call on Elon Musk’s Tesla. The British bank upgraded the electric vehicle company’s shares from Equal Weight to Overweight and raised its price target from $370 to $450. An Overweight rating indicates that an analyst expects a stock to outperform other companies in the same sector. The new target suggests about 21% upside from Tesla’s closing price last week.

Analyst Dan Levy said growing expectations of a merger between Tesla and SpaceX drove the upgrade, though he also pointed to potential improvements in Tesla’s car, energy, and Robotaxi operations.​“With a combination heavily expected, and with expectation for some premium to Tesla stock, we believe this should drive upside for the stock,” Levy wrote in a recent note to investors, which was reviewed by CNBC.

His assessment came days after Musk discussed the potential transaction on a SpaceX earnings call. “I think it would be a good idea, but it’s really up to the special committees of both companies,” Musk said. Tesla shares rose about 2% in premarket trading after Barclays upgraded the stock.​Why Barclays expects a merger to benefit Tesla shares​Both companies have created committees of independent directors to consider a possible combination.

Musk leads Tesla and SpaceX and holds large stakes in both, so he's a conflicted party and can't participate directly in the committees’ discussions.​Barclays expects any transaction to include a premium for Tesla shareholders, meaning SpaceX could offer them shares valued above Tesla’s market price before the deal. Levy described the potential merger as “a key part of the Tesla bull case,” referring to the reasons investors may expect the stock to rise.​However, no agreement has been announced.

Musk warned investors not to assume a merger is certain, and shareholders of both companies would need to approve any deal. The Associated Press reported that Musk played down the possibility of an imminent transaction.​Barclays considers an all-stock acquisition of Tesla by SpaceX the most likely structure. Under that arrangement, Tesla investors would receive SpaceX shares instead of cash.​Tesla’s other businesses supported the upgrade​Levy said Tesla’s automotive business could return to growth this year after two years of declines.

He expects further gains in 2027 from Full Self-Driving adoption and increased exports from the company’s Shanghai factory.​Tesla has also said its energy business is almost fully booked for 2027 because of demand from data centres. Barclays believes demand could boost energy-storage shipments by more than 50%.​The bank also cited a recent increase in miles travelled by Tesla’s Robotaxi fleet.

Levy said the change gave him more confidence that the service could compete with Alphabet-owned Waymo.​Barclays’ $450 price target and Overweight rating remain the bank’s assessment, not a confirmed outcome. Tesla shares were still down more than 17% year-to-date before the upgrade.You use AI every day. Now get your AI Quotient. Take the AIQ test.