It didn’t take long for SpaceX (SPCX) to turn from hype to a disappointing IPO. The stock is trading near $161 at the time of writing on Thursday afternoon, July 2, nearly 25% below its highest close of $211.39 on June 16.
Many people expected it to become a typical Elon Muskmeme stock, but this quick retreat signaled that tech mega-cap growth stocks aren’t that hot.
The company that achieved a historic initial public offering and raised more than $85 billion, according to Forbes, didn’t wait long to make eyebrow-raising moves.
SpaceX waited less than two weeks after its IPO to raise $25 billion by selling bonds, as reported by CNBC, and this surely didn’t help improve the sentiment.
In a research note shared with me, Wedbush analyst Dan Ives and his team shared their opinion on the SpaceX stock. Notably, this is probably Ives’ last note for Wedbush, as he leaves the firm to launch a merchant bank, according to CNBC.
Ives’ thesis is bullish, but he is bullish most of the time, or 81.33%, according to his TipRanks profile, so it’s really not a surprise.
Wedbush initiates SpaceX coverage
The team believes SpaceX’s advantage lies in access to three core markets. What they see is Starlink targeting connectivity, Starship targeting space launches, and xAI with its Colossus clusters acting as a hyperscaler.
The company’s profitability driver is Starlink.
Ives noted that Starlink has only recently begun to gain global telecom and broadband market share and that SpaceX holds less than 1% market share.
Related: SpaceX investors may be ignoring troubling trend
The team acknowledged that the company is seeking additional financing options, adding that they believe that this is warranted given the markets it is looking to capitalize on.
Analysts said that the reusability of its rockets remains a strategic advantage, and that without it, long-term orbital compute business would not be feasible.
Ives initiated coverage of SpaceX stock with an Outperform (Buy) rating and a price target of $190. The price target is based on the sum-of-the-parts valuation model and fiscal year 2028 estimates, and implies an enterprise value of $2.48 trillion.
Morningstar, Susquehanna, and bond markets aren’t thrilled with SpaceX
Morningstar equity analyst Nicolas Owens is very bearish on SpaceX, and he values the stock at $63 per share.
He believes the IPO price makes sense only in the most optimistic Moonshot scenario, implying the price assumes that scenario is very likely. The Moonshot scenario requires a rapidly reusable Starship and commercially competitive orbital data centers. He concludes that this outlook is very uncertain.
Susquehanna initiated coverage of SpaceX (SPCX) with a neutral rating and $170 price target, according to TheFly.
More tech stocks:
- Bank of America resets Intel stock price target
- Morgan Stanley resets Nvidia stock forecast after key event
- Bank of America resets Broadcom stock price target after earnings
Analysts said that the stock’s current valuation “requires premium multiples on very aggressive revenue and EBITDA growth assumptions.” They noted that some of the markets SpaceX operates in are relatively unproven.
According to the Financial Times, after obtaining investment-grade credit ratings from three agencies, SpaceX “was priced at the cheap end of this part of the debt universe, but at a meaningfully better level than Oracle.”
Oracle (ORCL) is known for its high debt and high capex plans, and has recently said it will increase spending in fiscal 2027, as reported by Reuters.
Beating Oracle sets a low bar, and that is exactly why the Financial Times made the comparison.
Potential risks for SpaceX
Here are some of the downside risks for SpaceX, according to its S-1:
- Failure or delay in the development of Starship at scale
- Difficulties in maintaining the required regulatory approvals for its space-related activities
- Changing laws and regulations could have a negative impact on xAI
