Tesla Stock Drops 4% as Q3 Profit Falls 43% Amid SpaceX Talks

Tesla stock fell more than 4% in early October 22 premarket trading after disappointing third-quarter earnings. Shares retreated toward $370 after closing Wednesday’s regular session near $386.63.

Tesla reported $28.05 billion in revenue, largely unchanged from the previous year. However, operating income declined 56% as expenses increased.

Investors also assessed a potential merger with SpaceX, although neither company announced a definitive agreement.

Elon Musk Delivered Soft Sales Guidance

Tesla stock dropped after the company published its third-quarter earnings report. The report showed automotive sales fell 3% to $20.56 billion from a year earlier. The annual decline coincided with the weak deliveries, which was caused by the fact that many Americans rushed to buy cars ahead of the expiry of the federal tax credit.

Tesla’s energy generation and storage revenue was also in the red, falling by 16% to $2.8 billion. It made over $3.13 billion in the second quarter. The only bright spot for the company was its service revenue, which rose by 33% during the quarter to $4.6 billion. In total, Tesla made $28 billion in revenue, largely flat from what it made in the same period last year.

The latest results also showed that Tesla’s margins narrowed during the quarter. Its operating margin dropped to 2.6%, while the adjusted EBITDA margin was 13.9%.

Tesla’s results are a sign that the company is doing too much to gain an edge against its competitors, like General Motors and Ford. It recently launched its flying car, which uses some of the technologies from SpaceX. At the same time, it has started mass production of its semi truck.

Most importantly, Tesla is investing heavily in robotics through its Optimus product. It is also investing substantial resources in the development of its Terafab project, which is a collaboration with SpaceX. Tesla hopes that Optimus will be the market leader in this industry, where companies like Boston Robotics dominate. Its manufacturing has started in Nevada.

Tesla stock dropped because the company issued a soft guidance, which showed that it expects to deliver fewer cars this year.

Tesla Stock Faces Uncertainty Over SpaceX Merger Discussions

Tesla stock also faced uncertainty surrounding discussions about a potential SpaceX merger.

Elon Musk confirmed on October 20 that both companies established independent committees to evaluate a possible combination.

According to TechCrunch, the committees comprise independent directors from Tesla and SpaceX. Musk acknowledged conflicts arising from his ownership interests in both companies.

However, he cautioned that the proposed transaction might not proceed.

A merger could combine Tesla’s automotive, energy, and robotics operations with SpaceX’s launch, satellite, and computing businesses.

Nevertheless, the companies operate under different regulatory requirements. SpaceX’s U.S. government contracts and Tesla’s Chinese operations could complicate approval.

The companies would also have to resolve valuation, governance, and shareholder-approval questions.

Tesla’s earnings added another financial consideration. Its results recorded a $142 million unrealized loss on its SpaceX equity investment.

The accounting loss does not represent a completed sale of SpaceX shares.

Meanwhile, no official merger terms, transaction valuation, or completion schedule have emerged.

Tesla Stock Price Analysis: Can $389 Resistance Hold?

Tesla stock approached $389 on October 21 before reversing following the earnings release.

Historical prices showed nearby highs of $386.70 on September 23 and $388.56 on October 9. The October 21 session reached approximately $388.83.

These levels established a potential resistance zone between $386 and $389.

However, repeated tests of resistance do not independently confirm a triple-top reversal pattern. Confirmation would require a sustained breakdown below the relevant support area.

A decline below $370 could bring the October 20 low of $363.64 into focus. Further selling might expose the October 16 low near $349.33.

Conversely, a sustained recovery above $389 could weaken the bearish outlook. Such a move could bring the psychological $400 level into consideration.

The original bearish Moving Average Convergence Divergence and exponential moving-average claims remain unverified.

Tesla stock now faces pressure from weaker operating earnings and unresolved merger discussions. A recovery above $389 would strengthen the technical outlook, while deeper losses could expose $350.

This article is for informational purposes only and does not constitute financial advice. Stock investments carry volatility and potential capital losses. Readers should conduct independent research before making investment decisions.