Key Points
Space Exploration Technologies (NASDAQ: SPCX) has plenty of supporters, including the billionaire investor Ron Baron — and for good reason.
Baron founded the asset management firm Baron Capital in 1982 with just $10 million. Earlier this month, the fund had total assets nearing $56 billion. SpaceX and Tesla (NASDAQ: TSLA) founder Elon Musk have played a big role in Baron Capital’s gains over the past 12 years, and Baron thinks SpaceX is poised to be something special.
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Here’s what a $50,000 investment in SpaceX stock today could be worth in a decade, according to Baron.
Image source: Getty Images.
Baron Capital has made a killing off Elon Musk
Baron is widely considered one of the best growth investors ever, so it should come as no surprise that some of Musk’s companies appealed to him. Baron first struck it rich off Musk by investing $400 million in Tesla between 2014 and 2016.
That turned out to be a good bet. Baron, on CNBC, said the fund has made about $8 billion in profit from its Tesla investment. This also served as a segue into SpaceX. Baron started investing in SpaceX when it was private in 2017, eventually building a $1.7 billion stake.
In a letter to investors earlier this year, Baron said the SpaceX position would be worth $24 billion if SpaceX proved successful in raising $70 billion. Including the greenshoe allocation — additional shares that the underwriters have the right to purchase following a company’s initial public offering — SpaceX raised close to $86 billion.
SpaceX also trades at a market cap of roughly $2 trillion, and Baron bought an additional $1 billion worth of shares in the IPO.
Why Baron thinks SpaceX will moon
Baron thinks Musk and SpaceX have a huge head start on the competition, at least a decade, when it comes to making satellites and rockets and building networks. Baron has also long been a believer in Elon and doesn’t think there will ever be anyone like him again.
While SpaceX’s artificial intelligence unit (which houses the Grok intelligence platform, data centers, and a potential future chip manufacturing facility) has grabbed most of the attention in discussions of SpaceX’s growth potential, Baron is extremely excited about the company’s low Earth orbit satellite internet service, Starlink.
“It’s going to be the internet for the entire planet,” Baron said on CNBC on June 16, adding that the service is now planning to eventually have 100,000 satellites because the demand for data is so massive.
In a decade, Baron also expects Starlink to generate $1 trillion in annual revenue and about $700 billion to $800 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA), which he believes would put the value of Starlink alone at $14 trillion.
Baron is also excited about the company’s artificial intelligence unit, specifically the potential for orbital data centers, which he thinks SpaceX can launch as soon as 2027. In fact, in three years, Baron thinks it’s possible that SpaceX will have 1 million satellites in space.
Finally, Baron is also extremely excited about the facility SpaceX is planning to build in partnership with Tesla and Intel, which will focus on building custom chips that are cheaper and specifically designed for the performance needs of these companies.
Baron’s expectations for the stock
Needless to say, Baron is as enthusiastic about SpaceX as anyone out there.
Retail investors should be careful not to blindly follow institutional investors and instead conduct their own due diligence.
While Baron is widely regarded as one of the best investors, institutional money can get it wrong just like anyone else. Furthermore, several things need to happen for Baron’s predictions to come true.
For one, SpaceX needs to make its heavy-lift, fully reusable rocket, Starship, operational. It must also determine whether orbital data centers are feasible and how much they could cost.
That said, in a letter to shareholders in late April, Baron said he expects SpaceX to be worth 10, 20, or even 30 times its post-IPO value in 10 to 15 years. If he’s correct, a $50,000 investment in SpaceX around the IPO price of $135 could be worth anywhere from $500,000 to $1.5 million.
I think it’s difficult to make a call like this so early in the company’s public life, but if you are looking for a bull on SpaceX, Baron is your guy.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.