Tesla investors who have bet on Elon Musk and his electric vehicle company have been rewarded for their faith time and again.
The stock seems immune to prolonged downturns, even when Tesla (TSLA) fails to deliver on one of Musk’s grandiose promises. And when he does deliver, the stock also pushes higher.
But one of the main promises of Tesla’s stock right now is the very real possibility that down the road, the company will merge with SpaceX, Musk’s trillion-dollar space exploration company.
When that happens, investors who have been backing the company will receive a “takeout premium” that could allow a few to retire early.
However, analysts at BNP Paribas have a warning for those investors looking to up their stakes now: You may have to wait a while for that takeout offer.
Tesla, SpaceX cash burn complicates potential merger
Investor sentiment has improved greatly amid widespread SpaceX merger speculation, BNP Paribas analysts led by James Picariello said in a note viewed by TheStreet. Still, the firm said it is maintaining its underperform rating and $280 price target due to concerns over Tesla’s cash burn over the next two years.
Additionally, the firm said SpaceX’s own cash burn makes it unlikely a merger will happen in the near future.
“We believe a potential SpaceX-Tesla merger is complicated by significant cash burn at both companies and meaningful regulatory risks. SpaceX consensus points to cash burn of $216 billion in ’26E-31E, combined with TSLA’s multi-year burn cycle beginning this quarter and with multiple downside scenarios,” the analysts added.
“Meanwhile, the need for multi-jurisdiction approvals (involving defense work) and Tesla shareholder support suggests any deal will take time.”
Tesla revealed earlier this year that it is increasing its expected capital expenditure budget this year to an eye-watering $25 billion. BNPP analysts expect the company to average spending up to $23 billion a year through 2030 as it looks to ramp up its Optimus humanoid robot and Robotaxi platforms.
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Tesla cash burn plan has a few obstacles
While Tesla investors back Elon Musk’s vision where the company will be producing a million humanoid robots per year, it’s going to take more than a $25 billion per year cash burn to make that happen.
BNPP analysts said they “fear the company will face daunting KPIs (key performance indicators) at its Robotaxi and Optimus businesses over the next two years, bringing downside risks to core operations before any SpaceX merger could realistically materialize.”
If Tesla fails to hit its KPIs over the next year and a half, BNPP sees significant downside risk to its $280 price target, which is already well below the company’s $407.76 closing price from Friday, July 10.
However, if that does happen, the firm also believes it is more likely that a merger occurs to rescue the company.
“Under this framework, a +30%-40% takeout premium would still only justify fair value of $360-$390 per share. We of course should then assign a probability of a SpaceX-Tesla merger to that takeout premium, which at (let’s say) ~50% likelihood, cuts the premium in half,” BNPP said.
That would imply a takeout range between $320-$335 per share, which is again, much lower than the stock’s current trading levels.
But if the merger does go through, investors will have a whole new set of problems to worry about.
“SPCX cash flow is sharply negative, with the company currently expected to burn ~$30 billion this year, with ~$194 billion burned through 2030. While we have little concern the combined entity would be able to raise additional capital if/when needed, it most certainly would further dilute current Tesla shareholders,” BNPP said.
Related: Tesla stock gets a surprising SpaceX reset
