SpaceX analyst debut set to test US$2.2 trillion valuation

SpaceX is challenging to value because it isn’t easily comparable to traditional aerospace companies, telecommunications providers, cloud infrastructure or AI businesses. Photo by ANGELA WEISS/AFP via Getty Images

Article content

Investors in SpaceX have been largely flying blind since the company’s record-breaking IPO last month, with few financial projections to help determine what the stock is actually worth.

Article content

That changes next week, when the quiet period ends for analysts at banks that underwrote the US$86 billion initial public offering, which was led by Goldman Sachs Group Inc. Morgan Stanley, Bank of America Corp., Citigroup and JPMorgan Chase & Co., with 18 other banks participating. Starting Tuesday, investors should expect a pile of new research, price targets and growth estimates, all of which should help shed light on where the shares are likely headed in the near term and over the next few years.

Article content

Article content

Article content

“Everyone’s talking about what this company could be in 2030 and not what they can be for the next 12 months,” said Art Hogan, chief market strategist at B. Riley Wealth. “It’s an investment where you’re looking out to a brighter future, but you’re still looking out four years.”

Article content

Article content

The problem with figuring out what SpaceX is worth lies in the difference between its current numbers and what is expected in the not-too-distant future. The company, which is officially called Space Exploration Technologies Corp., is expected to report about US$36 billion in revenue in 2026, based on a small number of early estimates from analysts at firms that did not participate in the IPO. And it isn’t profitable.

Article content

SpaceX’s price-to-sales ratio is 41 times revenue projected over the next 12 months, according to data compiled by Bloomberg. To get a sense of how extreme this is, the most expensive stock in the S&P 500 index based on this metric is Palantir Technologies Inc., which trades at 32 times. Apple Inc. and Microsoft Corp. are both priced below nine times estimated sales.

Article content

Article content

“There’s so much future value of the company tied up in revenue streams that are still to some extent distant,” said Robert Gruendyke, senior portfolio manager for the growth equity team at Allspring Global Investments. “It’s going to lead to much more volatility in the stock than most more established, mature businesses.”

Article content

Article content

To square SpaceX’s current value Wall Street has been talking up its aggressive growth path. The research team at Goldman sees the company’s total revenue hitting US$474 billion in 2030. Evercore ISI analysts expect sales to top US$1 trillion by 2031. Morgan Stanley analysts said revenue could reach US$3.4 trillion in 2040, according to a report in the Wall Street Journal.

Article content

Article content

“I may not be alive to see that,” said Vikram Rai, a portfolio manager and macro trader at First New York. “When you throw projections so far out in the future, there’s no way to check it.”

Article content

This is why the research initiations will be important, because they should include more concrete near-term projections and figures for investors to compare as they assess what has quickly become one of the hottest stocks in the market.

Article content

Article content

The shares went public at US$135 on June 11, opened for trading at US$150 a day later, and immediately took off. On June 16, SpaceX closed at US$201.80 with a market capitalization of US$2.6 trillion, making it the sixth-largest company in the world. Then, the momentum shifted. On Wednesday, the stock closed at US$157.54 with a market capitalization of less than US$2.1 trillion, down 22 per cent from its high and not far from where it started trading after the IPO.