The stock market debut of Space Exploration Technologies (NASDAQ:SPCX), or SpaceX as it’s usually known, has investors on both sides of the Atlantic excited.
Such was the interest in its IPO that most applications for the company’s shares were scaled back. Many in the UK are likely to have been allocated the minimum number of shares of 20, costing $2,700 (£2,013). But as disappointing as it might be not to have received their full quota, they’re still sitting on a small profit.
However, it’s the future that really matters. Let’s see what might be in store for Elon Musk’s latest venture and all those that have invested in SpaceX.
No consensus?
The first thing to note is that there’s a wide variation in the share price targets set by analysts. Here are just a few examples:
- Morningstar – $62.
- Citi – $200.
- Bank of America – $235.
- Morgan Stanley – $300.
- Raymond James – $800.
Some of the reasoning behind the two extremes in this list provide a good summary of the bull and bear investment cases. Let’s take a closer look.
A bullish view
The most optimistic is Raymond James. It says SpaceX is “one of the defining industrial infrastructure companies of the 21st century” and that the key to its future success is Starship.
It’s still being developed but, if all goes to plan, it will be the most powerful rocket ever made (with enough thrust to lift the equivalent of 13 fully-loaded Boeing 747s) and will hugely reduce the costs of transporting cargo and people into space.
The financial group’s forecasting an eye-watering EBITDA (earnings before interest, tax, depreciation, and amortisation) for SpaceX of $696bn (£521bn) by 2031. For context, I’ve seen estimates suggesting that the combined EBITDA of the FTSE 100 is £210bn-£240bn.
On the other hand…
At the other end of the scale is Morningstar. It says its valuation is “the result of mathematics more than scepticism”. It also assumes that Starship will be launched several times a week but it doesn’t expect the rocket to become commercially viable until 2028, at the earliest.
As well as this, the investment research firm isn’t very keen on xAI, owner of X (Twitter) among other things, which it says could be a “material threat of value destruction”.
It’s amazing how a company can inspire such widely differing opinions.
My view
Even though I’m a shareholder in SpaceX, I have to admit that the chances of the group living up to the hype are pretty remote. Do you want to live on Mars along with a million others? The air’s pretty thin and I believe it can get very cold. Also, it might take a while to go and visit your relatives back on Earth.
Having said that, even if it lives up to only a few of the predictions, including successfully deploying a fleet of orbiting data centres into space, I suspect its stock’s going to be valued much more highly than it is today. By how much? I have no idea. But that’s part of the fascination of Musk and SpaceX.
For those comfortable with a highly speculative investment, I think Space Exploration Technologies is a stock to consider.
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James Beard owns shares in Space Exploration Technologies plc.
