SpaceX Nears $100: Where is the Market's Expectation Gap?
- Core Thesis: Morgan Stanley believes SpaceX's stock price has hit a new low (around $108) due to selling pressure from the lock-up expiry. However, this presents a buying opportunity, as the current valuation completely ignores the value of the AI business. The stock price is supported solely by rocket launches and the Starlink business.
- Key Factors:
- Analysts maintain an Overweight rating and a $300 price target. If the stock price falls to $100, the market's valuation of SpaceX's AI business would be zero or even negative. The implied EBITDA forecast for the rocket launch + Starlink business would be approximately 30% lower than its base case.
- At a stock price of $100, SpaceX's 2028 EV/EBIT would be 18x, close to the industry median. However, its revenue compound annual growth rate (76%) is three times the median of comparable companies (26%).
- Morgan Stanley's 15-year DCF model values the rocket launch + Starlink business alone at approximately $136 per share, which is already higher than the current stock price. This implies that the AI business is a "bonus."
- Currently, SpaceX holds over three-quarters of the global market share for mass-to-orbit and maneuverable on-orbit satellites. Its connectivity business is growing by nearly 50%, and its EBITDA margin is as high as 40%.
- Near-term positive catalysts include the 14th/15th test flights of Starship (September/October), the release of Grok 4.6, and a doubling of computing power to 2 gigawatts. These could trigger a stock price recovery.
- Downside risks include lock-up expiry selling pressure, slowing Starlink user growth, high AI infrastructure costs, and regulatory uncertainty. The downside scenario target price is $75.
Original Author: Yang Chen
Original Source: Wall Street CN
SpaceX's stock price is under pressure due to the upcoming lock-up expiry, but Morgan Stanley believes this precisely creates a buying opportunity due to a valuation dislocation.
During Monday's trading session, SpaceX's stock price once fell to 108.66, hitting a new low since its listing, declining over half from its peak of 225.64 USD. With the lock-up period expiring, some investors believe the stock could further decline to 100 USD.
According to market sources, Morgan Stanley analyst Adam Jonas recently published a report stating that if the stock price truly falls to 100 USD, it would imply the market values SpaceX's AI business at zero or even negative. Furthermore, the implied FY2028 EBITDA for the Rocket Launch+Starlink business would be approximately 30% lower than the bank's base case forecast.
The firm maintains an Overweight rating on SpaceX with a price target of 300 USD. Morgan Stanley believes the current divergence between pessimistic sentiment and fundamentals creates an attractive entry point. At prices below 120 USD, investors are essentially obtaining the option value of the company's entire AI business for 'free,' while the core Rocket Launch+Starlink business alone covers the current stock price.
Divergence Between Market Sentiment and Fundamentals
Although there have been no significant changes in SpaceX's fundamentals over the past few weeks, bearish conviction has paradoxically strengthened, while bulls have become more inclined to wait for clearer catalysts.
Based on conversations with investors, the core of the disagreement lies in the pricing of the AI business. Most investors heavily discount or completely ignore the value of Grok and Cursor, believing that AI monetization opportunities are primarily concentrated in the neocloud sector.
Reasons cited include: the AI business's capital expenditure is too high relative to the Rocket Launch+Starlink business, significant uncertainty in the economic model, and management's excessive focus on this segment.
Some investors even assign a negative value to AI, arguing that high capital expenditures will erode overall value. Morgan Stanley holds a different view, considering this pricing approach overly conservative and ignoring multiple potential paths for AI monetization.
What Does 100 USD Imply?
Based on the bank's FY2028 base case forecast – revenue of 157 billion USD (including an average of 6 GW of computing power priced at 16.5 USD per watt, and 35 million average consumer users with 46 USD monthly ARPU), and EBIT of approximately 69 billion USD – if the stock price falls to 100 USD, SpaceX's corresponding FY28 EV/EBIT would be 18x, roughly in line with the median of comparable companies. However, its revenue compound annual growth rate (CAGR) from 2025 to 2030 is 76%, approximately three times the median 26% for comparable firms.
From a cross-sectional perspective, an 18x EV/EBIT would rank approximately 81st in the S&P 500 (excluding financials and real estate), placing it in the same range as Boeing (21x), Waste Management (19x), CSX (18x), and Garmin (18x).
Breaking down the business further, if the Rocket Launch+Starlink business is valued at 40x EV/EBITDA (slightly below the space comp median of 46x), the implied value of the AI business would be exactly zero. If a slightly higher multiple of 50x is used, the AI business's implied value would be negative 300 billion USD. Morgan Stanley considers neither scenario reasonable.
Core Business Already Supports Current Stock Price
Even completely excluding the value of AI, SpaceX's Rocket Launch+Starlink business alone is sufficient to support the current stock price.
The bank's 15-year DCF model values the Rocket Launch+Starlink business independently at approximately 136 USD per share, using a 56x EV/EBITDA multiple. At the hypothetical 100 USD price, this implies the market is pricing this business with an FY2028 EBITDA roughly 28% below Morgan Stanley's base case forecast, while assigning zero value to AI.
Currently, SpaceX holds over three-quarters of the global share in mass-to-orbit and maneuverable satellites in orbit. Its connectivity business is growing near 50% this year, with EBITDA margins reaching 40%. Buying SpaceX at current valuations is akin to acquiring a space and connectivity business with a dominant market position and high growth certainty at a discount, with the entire AI option value essentially thrown in 'for free.'
From a sum-of-the-parts valuation perspective, Morgan Stanley's 300 USD base target price is composed of: Space business 8 USD, Connectivity business 128 USD, X and Grok business 12 USD, and Enterprise AI business 152 USD.
Upcoming Positive Catalysts
On the launch front, Starship's 14th and 15th test flights are expected in September and October, respectively. These could include the first catch of the V3 Starship booster, the first orbital flight (deploying operational V3 satellites), and the first catch of the Starship upper stage.
On the AI front, Grok 4.6 (a 2 trillion parameter model) is expected to be released within the next month, and Grok 5.0 (a 6 trillion parameter model) is anticipated by year-end. The acquisition of Cursor is expected to close by the end of Q3, which will likely involve disclosing Cursor's Annual Recurring Revenue (ARR) and providing a material update on Grok platform adoption rates.
On the computing power expansion front, SpaceX expects to double its computing capacity from current levels to 2 GW by year-end, which could lead to more large-scale neocloud contracts.
Given the market currently places almost no value on AI, any positive development mentioned above could serve as a catalyst for an upward stock price correction.
Key Risks Cannot Be Ignored
In the short term, the stock faces dual pressures: first, the upcoming lock-up expiry will bring additional supply pressure; second, the upcoming earnings report may not answer the questions investors are most concerned about.
The bear case scenario (price target 75 USD) assumes: delays in Starship progress compress the narrative, AI monetization is significantly slower than expected, the Rocket Launch+Starlink business accounts for over 90% of total valuation, and Starship's operational timeline is pushed to 2029.
Other major downside risks include: slowing Starlink user growth, persistently high AI infrastructure costs per watt, prolonged AI business development cycles, equity dilution from increased financing needs, and regulatory uncertainties.
The bull case scenario (price target 600 USD), conversely, assumes the full and accelerated deployment of Starship, orbital computing power, and Terafab. In this scenario, AI would account for over 60% of total valuation, with computing power deployment achieving a CAGR of 46%.
