Investor's Corner
Wall Street’s reaction to Tesla’s proposed buyout of SolarCity
Since the proposed deal of Tesla to acquire SolarCity in a stock exchange with no cash involved was announced, a flurry of reports flooded the Internet, pretty much with many Wall Street reporters and pundits decrying the proposed deal as “crazy”, “not a no-brainer”, an “eclipse”, “plot of video game”, “sounds nuts”, but also with a few noting that Elon was “creating a clean energy empire” or “offering a one-stop shop.”
At the same time, the after-market reaction was swift: TSLA stock plunged 12% and SCTY stock rose 18%. This action was predictable. Since the Tesla – SolarCity deal is an exchange of stock, no cash deal, when adding about 12 million new shares, an 8% dilution of TSLA stock will occur. This dilution covers the majority of TSLA stock drop. Another negative factor is going from $2 billion of TSLA cash flow losses to $4.8 billion of cash flow losses of the combined companies, an increase of over 130%. Thirdly, TSLA debt will double after the deal. So a 12% drop should not leave anyone surprised.
Similarly, the assured “premium of approximately 21% to 30% over the closing price of SolarCity’s shares,” as stated in the letter to Lyndon Rive, pretty much matches the 29 percent rise of SCTY in extended trading, also matching SolarCity’s average 12-month price target of $29.82 among analysts surveyed by Bloomberg. So the stock action of both TSLA and SCTY was completely predictable.
Looking at the reporters / pundits comments, Bloomberg was the outlet with the most reports, 4 in all.
Tom Randell of Bloomberg reported in “Musk Buys Musk: Tesla’s SolarCity Deal by the Numbers”, that “ either Musk is bailing out a beleaguered company that’s run by his cousin, Lyndon Rive, or he’s consolidating a clean-energy empire at rock-bottom prices. Or both.”
Tom is one of the most bullish on the deal, saying that “It allows Musk to integrate the three-legged stool of clean energy in a way the world has never seen: electric cars, solar power, and grid battery storage all in one place. If so inclined, you could provide for all of your energy needs without ever leaving the Tesla family.”
Chris Martin of Bloomberg reported in “In SolarCity Bid, Tesla’s Musk Targets Customer Who Wants It All” that “Tesla Motors Inc.’s offer to buy SolarCity Corp. would combine two already deeply linked companies to offer clean energy enthusiasts a one-stop shop” and that “the challenge I see around this for both companies is that they’re kind of strapped for cash,” quoting Hugh Bromley, an analyst for Bloomberg New Energy Finance in New York. “They both need cash injections to fuel their growth.”
Dana Hull of Bloomberg reported in “Tesla Takeover of SolarCity Not a ‘No-Brainer’ for Investors” that “Oppenheimer & Co. analysts including Colin Rusch downgraded Tesla to perform from outperform in a research note published late Tuesday, saying they expect “a robust shareholder fight over this acquisition centered on corporate governance” and that “Credit Suisse Group AG analysts including Patrick Jobin said in a separate note that they expect “resistance from Tesla shareholders” and warned of “many corporate governance challenges.”
Lastly Liam Denning of Bloomberg reported in “Tesla’s SolarCity Eclipse” that “the timing is odd, to say the least. Tesla’s all-stock offer is pitched as providing SolarCity’s investors with a premium of 21 to 30 percent, based on a proposed valuation band that’s subject to completing due diligence (itself an unusual proposal)” and “Tesla is jumping in as SolarCity’s entire business model is being openly questioned amid rapid cash burn and stubbornly high overheads.”
Ominously he also reported that “Tuesday evening, not long after news of the offer broke, Tesla’s valuation had dropped by $3.8 billion in after-hours trading — 1.8 times the entire market capitalization of SolarCity before the announcement. Awkward, much?”
Ary Levi of CNBC reported in “Elon buying Elon: Sounds a lot like the plot of a video game” that this was “potential deal in which one of the country’s best-known tech billionaires will effectively transfer cash from one of his pockets to another – sounds nuts.” and joked about that “even if we all exist in a simulation, as Musk suggested at the Code Conference this month, he still has to obey securities laws.”
Christine Wang of CNBC reported in “Bid for SolarCity may mean Elon Musk doesn’t see Tesla as an auto company” quoting trader Karen Finerman saying that “Tesla’s offer, valued up to $28.50 per share, doesn’t seem like a gigantic price for a company that was trading significantly higher not that long ago.”
Charley Grant and Spencer Jakab of The Wall Street Journal reported in “Tesla Buying SolarCity: This Deal Defies Common Sense” that “just a day after Tesla boss Elon Musk made the odd boast that one of its cars “floats well enough to turn into a boat,” he did something even odder. Tesla’s bid for solar panel installation firm SolarCity on Tuesday afternoon is the sort of move that, even for the most Panglossian Silicon Valley investor, stretches the bounds of industrial logic” and that “as Mr. Musk warned about his amphibious wonder car, such harebrained schemes can only float “for short periods of time.”
Mike Ramsey, Lynn Cook and Mike Spector of The Wall Street Journal reported in “Tesla Offers to Acquire SolarCity”, quoting Elon saying that “the acquisition aims to create a company employing nearly 30,000 people with all products renamed “Tesla” that will package electric cars, batteries and solar panels for customers.” They also warned that “it would also add to the growing complexity and vertical integration of Tesla and add an unprofitable operation to its already-strained finances.”
Nichola Groom and Paul Lienert of Reuters reported in “Tesla offers $2.8 billion for SolarCity in ‘no brainer’ deal for Musk”, quoting Elon saying that that “instead of making three trips to a house to put in a car charger and solar panels and battery pack, you can integrate that into a single visit. It’s an obvious thing to do.” But they noticed that “Tesla investors punished the company’s shares, however.”
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
Tesla (NASDAQ: TSLA) stock received a price target update from Pierre Ferragu of Wall Street firm New Street Research, citing the company’s growing lead in self-driving and autonomy.
On Tuesday, Ferragu bumped his price target from $520 to $600, stating that the consensus from the Consumer Electronics Show in Las Vegas was that Tesla’s lead in autonomy has been sustained, is growing, and sits at a multiple-year lead over its competitors.
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“The signal from Vegas is loud and clear,” the analyst writes. “The industry isn’t catching up to Tesla; it is actively validating Tesla’s strategy…just with a 12-year lag.”
The note shows that the company’s prowess in vehicle autonomy is being solidified by lagging competitors that claim to have the best method. The only problem is that Tesla’s Vision-based approach, which it adopted back in 2022 with the Model 3 and Model Y initially, has been proven to be more effective than competitors’ approach, which utilizes other technology, such as LiDAR and sensors.
Currently, Tesla shares are sitting at around $433, as the company’s stock price closed at $432.96 on Tuesday afternoon.
Ferragu’s consensus on Tesla shares echoes that of other Wall Street analysts who are bullish on the company’s stock and position within the AI, autonomy, and robotics sector.
Dan Ives of Wedbush wrote in a note in mid-December that he anticipates Tesla having a massive 2026, and could reach a $3 trillion valuation this year, especially with the “AI chapter” taking hold of the narrative at the company.
Ives also said that the big step in the right direction for Tesla will be initiating production of the Cybercab, as well as expanding on the Robotaxi program through the next 12 months:
“…as full-scale volume production begins with the autonomous and robotics roadmap…The company has started to test the all-important Cybercab in Austin over the past few weeks, which is an incremental step towards launching in 2026 with important volume production of Cybercabs starting in April/May, which remains the golden goose in unlocking TSLA’s AI valuation.”
Tesla analyst breaks down delivery report: ‘A step in the right direction’
Tesla has transitioned from an automaker to a full-fledged AI company, and its Robotaxi and Cybercab programs, fueled by the Full Self-Driving suite, are leading the charge moving forward. In 2026, there are major goals the company has outlined. The first is removing Safety Drivers from vehicles in Austin, Texas, one of the areas where it operates a ride-hailing service within the U.S.
Ultimately, Tesla will aim to launch a Level 5 autonomy suite to the public in the coming years.
Investor's Corner
Tesla Q4 delivery numbers are better than they initially look: analyst
The Deepwater Asset Management Managing Partner shared his thoughts in a post on his website.
Longtime Tesla analyst and Deepwater Asset Management Managing Partner Gene Munster has shared his insights on Tesla’s Q4 2025 deliveries. As per the analyst, Tesla’s numbers are actually better than they first appear.
Munster shared his thoughts in a post on his website.
Normalized December Deliveries
Munster noted that Tesla delivered 418k vehicles in the fourth quarter of 2025, slightly below Street expectations of 420k but above the whisper number of 415k. Tesla’s reported 16% year-over-year decline, compared to +7% in September, is largely distorted by the timing of the tax credit expiration, which pulled forward demand.
“Taking a step back, we believe September deliveries pulled forward approximately 55k units that would have otherwise occurred in December or March. For simplicity, we assume the entire pull-forward impacted the December quarter. Under this assumption, September growth would have been down ~5% absent the 55k pull-forward, a Deepwater estimate tied to the credit’s expiration.
“For December deliveries to have declined ~5% year over year would imply total deliveries of roughly 470k. Subtracting the 55k units pulled into September results in an implied December delivery figure of approximately 415k. The reported 418k suggests that, when normalizing for the tax credit timing, quarter-over-quarter growth has been consistently down ~5%. Importantly, this ~5% decline represents an improvement from the ~13% declines seen in both the March and June 2025 quarters.“
Tesla’s United States market share
Munster also estimated that Q4 as a whole might very well show a notable improvement in Tesla’s market share in the United States.
“Over the past couple of years, based on data from Cox Automotive, Tesla has been losing U.S. EV market share, declining to just under 50%. Based on data for October and November, Cox estimates that total U.S. EV sales were down approximately 35%, compared to Tesla’s just reported down 16% for the full quarter. For the first two months of the quarter, Cox reported Tesla market share of roughly a 65% share, up from under 50% in the September quarter.
“While this data excludes December, the quarter as a whole is likely to show a material improvement in Tesla’s U.S. EV market share.“
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