Wall Street has embraced SpaceX with bullish calls on Tuesday following its blockbuster IPO — all except for MoffettNathanson, the only sell-side researcher with the temerity to forecast that stock in Elon Musk’s rocket company will fall over the next year. MoffettNathanson initiated coverage of SpaceX with a neutral rating and a $131 price target, implying 18% downside from SpaceX’s close of $160.42 on Monday. The call stands apart from a wave of bullish initiations that welcomed the company’s long-term growth prospects despite its $2 trillion valuation. The research boutique said even its neutral rating on the stock might be overly generous. “It would be easy – some might argue prudent – to initiate coverage with a flashing red Sell rating,” the firm said in a note to clients. SPCX YTD mountain SpaceX since the June 12 IPO MoffettNathanson said traditional valuation frameworks fail to capture the potential investors are assigning to SpaceX’s dominance in rocket launches. “There is simply no credible financial model that can support what is at the time of this writing a roughly $2 trillion valuation. Our own certainly does not,” the report said. The analysts were skeptical of several projections highlighted by the company — and bullish investors. They called SpaceX’s nearly $30 trillion estimate for its total addressable market “absurd,” questioned forecasts for direct-to-device wireless services and said Musk’s goal of deploying 100 gigawatts of compute capacity into orbit annually by the end of 2029 exceeds today’s global installed data-center capacity and would require material inputs that likely won’t exist by then. Still, the firm stopped short of an outright bearish recommendation because it believes investors are valuing SpaceX as an option on future businesses that have yet to be conceived. MoffettNathanson said the bigger long-term threat isn’t whether SpaceX can execute technologically, but whether regulators eventually challenge the company’s growing dominance in launch services and the vertically integrated businesses built on top of that advantage. Such regulatory risks, however, are likely years away, according to the analysts. “For now, with ample reason for skepticism about forecasts, but with equal reason for optimism about the optionality that comes from the Space segment’s enormous moat and undeniable flywheel, we find ourselves conceding that today’s astronomical (yes, forgive the pun) valuation is perhaps not entirely unreasonable after all,” the analysts wrote.
