Several Wall Street analysts initiated coverage and set price targets for Space Exploration Technologies (SPCX 4.51%) before the company even went public. But now many on the Street are getting in on the action.
Recently, 15 new analysts initiated coverage on SpaceX, providing their initial ratings and price targets. While there are a variety of opinions on the Street, no one is more bullish than Raymond James.
Analyst Brian Gesuale just gave SpaceX stock its biggest price target yet, and it’s not even close. Here’s what a $10,000 investment in SpaceX would be worth if Gesuale ends up being right.
Image source: The Motley Fool.
The insanely bullish take
Twenty-seven Wall Street analysts have now issued price targets on SpaceX, and for the most part, sentiment is pretty bullish.
Twenty-two of the analysts have buy ratings on the stock, four recommend holding, and one recommends selling, according to TipRanks. The average price target implies 60% upside.
That’s pretty good, considering SpaceX stock hasn’t exactly crushed it since the initial public offering. While raising $86 billion is an incredible accomplishment and SpaceX still trades at over $1.9 trillion in market cap, the stock is barely above its opening-day price — and that’s after it joined several indexes, including the Nasdaq-100.
As if 60% upside weren’t enough, Gesuale has a massive $800 price target on SpaceX, implying multibagger returns and a market cap over $10 trillion.
Space Exploration Technologies
Today’s Change
(-4.51%) $-6.86
Current Price
$145.30
Key Data Points
Market Cap
Day’s Range
$145.07 – $150.57
52wk Range
$145.07 – $225.64
Volume
46.8M
Avg Vol
154M
“We see the company as one of the defining industrial infrastructure companies of the 21st century,” Gesuale said in a research note, according to Barron’s. “Starship represents the defining industrial innovation of our generation.”
Starship is SpaceX’s heavy-lift, fully reusable rocket that is the key to unlocking orbital data centers, which many investors see as one of the big opportunities that will allow the company to capture massive market share in the data center compute market. Gesuale wrote that Starship can reduce the cost of transporting equipment into space by nearly 100% while significantly increasing payload capacity.
The analyst believes that SpaceX will play a role as important as the railroads and electrification did by transforming rocket launches “from a bespoke aerospace capability into a transportation network defined by commercial aviation-like operating cadence and continuously declining unit costs.”
Gesuale is modeling for SpaceX to achieve $837 billion in revenue and $696 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) by 2031. He applied a 27x EBITDA multiple to arrive at his $800 price target.
Investors should apply a healthy dose of skepticism
Raymond James is a well-respected firm, but I did not see the $800 price target coming — not that it couldn’t be right. If Gesuale is correct, a $10,000 investment would turn into $52,600. Not too shabby.
That said, I would encourage investors to apply a healthy dose of skepticism here. While I’m sure Gesuale and his team have done their due diligence, the price target uses some assumptions that one simply cannot know right now.
The first implies that Starship will be up and running within a few years and will conduct missions regularly. However, Starship had only completed 12 test flights as of May, so it’s hard to know exactly when it will be ready for actual missions, let alone operate regularly.
Founder Elon Musk is known for doing the impossible, but it rarely happens on his predicted timeline. We also don’t yet know what orbital data centers will cost and what the ultimate total addressable market (TAM) for orbital compute will be.
Gesuale sees a TAM of $30 trillion, which isn’t far off from the total U.S. gross domestic product.
Again, he could be right, but investors need to prepare for either outcome: either he’s wrong or SpaceX succeeds immensely but has only, say, a $15 trillion TAM. Another scenario is if the artificial intelligence trade suffers a big setback. With the stock already nearing a $2 trillion market cap, there could be serious downside if some of these massive assumptions don’t play out.
