SpaceX (NASDAQ:SPCX) blasted onto the stock market less than a month ago but already the level of polarisation is quite amazing.
For example, one Wall Street analyst just gave the stock an $800 price target, while another well-known investor recently said he envisions a spectacular crash.
Who is right?
Blasting off to $800?
Soon after SpaceX went public, we saw a handful of broker price targets trickle in. Now though, that’s becoming a deluge, with most putting their estimates somewhere between $200 and $300.
The average is currently $247, implying the stock could surge roughly 65% by this time next year. But one analyst just blew that away by slapping an $800 price target on SpaceX.
That’s easily the highest on Wall Street. If it came to pass, it would result in a jaw-dropping 435% return, pushing the rocket maker’s market cap above $10trn.
The uber-bullish analyst is Brian Gesuale from Raymond James. In a note to clients, he called SpaceX “one of the defining industrial infrastructure companies of the 21st century“.
He singled out Starship as central to his thesis. Once up and running, this colossal rocket would lower the cost of getting stuff into space by 99%. It would become an unrivalled space infrastructure transportation network.
By 2031, Gesuale sees revenue reaching around $837bn, up from $38.5bn this year. EBITDA (earnings before interest, tax, depreciation, and amortisation) will rocket to almost $700bn.
Most of this will be driven by AI, with orbital data centres potentially operating by the mid-2030s.
SpaceX to crash?
By contrast, investor Jeremy Grantham calls SpaceX the “craziest IPO in the history of man“. Speaking on a recent episode of The Long View podcast, he said he would bet on a severe crash at some point.
His bearish arguments include:
- SpaceX has a “third-rate” AI offering.
- A lack of regulatory oversight around AI development.
- The vision for space travel is “utterly inconceivable” by most serious physicists.
- The $2trn valuation is extreme for a company “rolling in red ink“.
Who’s right?
Now, I agree that SpaceX is wildly overvalued right now. We’re looking at a forward price-to-sales ratio of around 51, with no bottom-line profits in sight due to a few years of heavy AI investments.
Moreover, there are significant engineering hurdles that could prevent Starship from working reliably anytime soon (let alone the challenges of long-distance space travel itself).
To be fair, the Raymond James analyst concedes that major launch failures could bring progress to a screeching halt. In this scenario, he thinks the stock could slide to $125 (below the $135 IPO price).
For me, the reality is probably somewhere in the middle. I can’t realistically see $800 on the horizon. But I agree that SpaceX’s commercial opportunities are vast if Starship works (supporting Starlink Mobile, orbital AI clusters, and more).
I mean, how on earth do you compete with a reusable space transportation system that large? Companies and even entire nations like China are already struggling to keep up with SpaceX — before Starship!
Finally, it’s worth remembering that most engineers/scientists dismissed reusable rockets as impossible or pointless before SpaceX made them work. So I certainly wouldn’t write off Elon Musk’s plans.
But the stock is just too expensive for me. For now, I’ll explore other opportunities.
Should you invest £5,000 in Space Exploration Technologies Corp. - Class A right now?
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Ben McPoland has no position in any of the companies mentioned.
