Shares of Elon Musk’s Space Exploration Technologies (NASDAQ: SPCX) have fallen 35% from their post-IPO high, but Wall Street says the stock is deeply undervalued. Among 40 analysts, the median target price is $217 per share, implying 65% upside from its current share price of $131.
Adam Jonas at Morgan Stanley is particularly optimistic. Shortly after SpaceX went public, Jonas put a buy rating on the stock and set his target at $300 per share. That implies 129% upside from its current price.
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Here’s what investors should know.
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SpaceX’s revenue growth accelerated in the second quarter, but the company is losing money
SpaceX is a vertically integrated business whose operations span three segments: space, connectivity, and artificial intelligence (AI). The company has an important competitive moat in reusable rockets, which have substantially reduced the cost to launch payloads into orbit. That economic edge helped SpaceX build Starlink, the largest satellite internet service in the world.
CEO Elon Musk wants to combine those proficiencies to develop orbital (space-based) data centers, which could theoretically solve the power and cooling problems that limit terrestrial data centers. SpaceX discussed its advantageous positioning in its SEC Form S-1: “We believe we are the only company with a commercially viable path to building orbital AI compute at scale.”
SpaceX delivered encouraging second-quarter financial results, its first report as a public company. Revenue increased 92% to $7.8 billion, a sharp acceleration from 15% revenue growth in Q1. The driving force behind that acceleration was strong momentum in the AI segment, where sales more than tripled.
However, SpaceX’s expenditures continued to swell, primarily due to massive investments in AI compute and, to a lesser extent, costs related to developing its next-generation Starship rocket. The company reported a net loss of $541 million ($0.09 per diluted share), and management indicated that AI infrastructure spending is likely to accelerate in the coming quarters.
“We expect to end this year with over 2 gigawatts of compute,” Elon Musk told analysts on the earnings call. “Our cumulative compute online by the end of next year will be several times higher. It may, let’s say, be closer to 10 gigawatts of compute than 5 gigawatts of compute.” Musk has also said the first orbital data centers could launch in 2027.
SpaceX just passed its first lockup expiration, but its float will more than triple before the end of 2026
SpaceX recently overcame an important hurdle in the expiration of its first lockup period on Aug. 6. The company sold 555 million shares in its initial public offering (IPO), representing less than 5% of its total shares outstanding, but another 911.5 million shares became available for trading on the second trading day following its Q2 financial report.
Countless pundits framed the event as a potential disaster, assuming that early investors and insiders would sell shares at the first opportunity. However, SpaceX stock has actually advanced more than 10% since the lockup period expired last week. Even so, shareholders aren’t out of the woods yet. There are more lockup expirations on the horizon.
SpaceX’s float (the number of shares available for public trading) will increase from about 1.4 billion today to more than 5 billion by year end. Some insiders and early investors may be eager to sell in the future, especially if the stock continues to decline.
Morgan Stanley’s Adam Jonas believes AI is a massive growth opportunity for SpaceX
Adam Jonas at Morgan Stanley justifies his target price of $300 per share by highlighting vertical integration. “SpaceX combines near-monopoly launch economics, the largest low-Earth orbit satellite network, and a fast-scaling AI infrastructure business,” he wrote in a note to clients in July. “We see the company as one of the few platforms that can link real estate in orbit, global connectivity, and compute capacity into one infrastructure stack.”
Jonas estimates SpaceX’s revenue will increase at 88% annually to hit $319 billion by 2030. He thinks the driving force will be the AI segment, where he anticipates annual revenue growth of 148% to reach $190 billion, driven by a combination of AI infrastructure services and enterprise AI applications. Meanwhile, Jonas says connectivity and space revenue will grow at 69% annually and 16% annually, respectively.
Unfortunately, SpaceX is a difficult stock to value, not only because the company is burning cash, but also because its plans to launch AI infrastructure into space are still entirely theoretical. Nevertheless, with the stock trading below its IPO price of $135 per share, I think investors with a time horizon of at least five years should consider buying a very small position today.
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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
