Tesla stock falls as post-earnings selloff continues

Tesla TSLA shares extended their decline on Monday despite broader market optimism following easing tensions between the United States and Iran.

The electric vehicle maker's stock traded as high as $317 before falling to around $307.58 in trading, down about 1.74%.

The decline came even as Wall Street showed signs of recovery, with the Dow Jones Industrial Average posting gains while benchmark crude oil prices fell nearly 5%.

Tesla shares have been under heavy pressure since the company's second-quarter earnings report last week.

The stock dropped 18% over the week, including a nearly 15% decline on Thursday after the company reported operating profit of about $400 million, well below Wall Street expectations of roughly $1.7 billion.

Investors were also disappointed by the absence of significant updates on Tesla's artificial intelligence initiatives, including its robotaxi and humanoid robot businesses.

The company is increasingly relying on those projects to drive future earnings growth as electric vehicle sales have remained largely stagnant over the past two years.

Following the earnings release, Deutsche Bank analyst Edison Yu reduced his price target on Tesla to $420 from $465 while maintaining a Buy rating.

Tesla stock has now fallen about 30% year to date and roughly 5% over the past 12 months.

The shares have erased their year-over-year gains after rallying to nearly $500 in December 2025 as optimism around AI peaked following the launch of Tesla's robotaxi service in Austin, Texas.

Investors focus on AI roadmap as growth expectations shift

The recent weakness reflects growing investor focus on Tesla's long-term artificial intelligence strategy rather than its traditional automotive business.

The company recently stopped producing the Model S and Model X, choosing instead to convert that production capacity for robot manufacturing.

Investors continue to look for evidence that Tesla can successfully scale its robotaxi network and AI-powered humanoid robots to support a new phase of earnings growth.

At the same time, some analysts remain cautious about the company's valuation and spending plans.

A Motley Fool report argued that Tesla continues to face pressure from weakening margins, declining profits, and higher investment spending.

The report also noted that the company's future growth remains uncertain, pointing to aggressive pricing strategies that could support revenue growth but weigh on profitability.

Merger speculation with SpaceX draws mixed reactions

Speculation about a potential merger between Tesla and SpaceX resurfaced after CEO Elon Musk discussed synergies between the two companies during Tesla's earnings call.

However, longtime Tesla commentator Gary Black dismissed the likelihood of such a deal occurring in the near future.

"I am amazed how many investors are holding $TSLA because they believe $SPCX will buy it."

"IMO, that won’t happen anytime soon since the potential dilution to SPCX shareholders is too significant if SPCX paid a 20% premium for TSLA only to have the combined entity trade at TSLA’s lower multiple."

Black argued that investors should instead own Tesla based on confidence in its autonomous driving ambitions.

"Owning TSLA for a buyout by SPCX is buying the greater fool theory."

Attention has also turned to SpaceX's recent stock performance.

After debuting at $135 and reaching a high of $225.64, SpaceX shares have fallen 32% over the past month, including an 8.5% decline over the last five trading sessions.