Morningstar just launched its research coverage of SpaceX — and it says the company’s current estimated valuation should be nearly 50% lower than the low end of the market’s estimated range.
SpaceX is set to go public this month in a much-anticipated IPO, seeking to raise $75 billion at a valuation of $1.5 trillion to $2 trillion.
But Morningstar says its analysis of the firm’s projected cash flows puts its fair value at $780 billion — 48% below a more conservative valuation estimates of $1.5 trillion — and that SpaceX’s stated growth opportunities are ambitious.
“The firm’s current market value is contingent upon paving the way for novel revenue streams, such as orbital computing, which we believe are possible given the firm’s unique advantages, but their viability, timelines, and financial outcomes remain highly uncertain,” equity analyst Nicolas Owens and equity director Suryansh Sharma wrote in a report on Monday.
SpaceX’s Starlink business will be its biggest profit driver over the medium term due to its established launch infrastructure, Morningstar said. Around 2 billion people living in remote areas globally stand to benefit from Starlink’s services.
Over the longer term, revenues could come from its AI data center business — it plans to launch data centers into space to provide much-needed compute power for AI.
But Morningstar’s most optimistic scenario for this business line means SpaceX will be able to support 21% of the projected demand for global compute power. Morningstar gives this scenario a 7% chance of happening.
Morningstar
In a worst-case scenario, SpaceX is unsuccessful in launching data centers into space after spending billions on the project. The most likely outcome, Morningstar said, is that SpaceX is able to support 4% of global compute demand by 2040.
“It’s a project that requires some unproven engineering to succeed, but we do see SpaceX as the best positioned to pursue it,” Owens and Sharma wrote.
Overall, Morningstar says SpaceX has a “narrow” moat against its competitors, as it spends tens of billions on its Grok AI chatbot, despite it not having an apparent advantage over other similar products.
As for whether buying the stock at the IPO is a good idea, Morningstar said there will probably be a near-term bump in the share price, but that investors would be better off waiting for a better entry point as more shares come to the market after lock-up periods for insiders expire.
“In the months following the IPO, when successive tranches of stock held by private investors and employees are slated for sale into the public market, selling pressure may weigh on the shares,” the analysts wrote. “As a result, we think long-term investors eager to participate in SpaceX’s future endeavors and potential success will have opportunities to do so with more margin of safety than the initial offering is likely to provide.”