SpaceX Stock Gets A Chorus Of Buys From Wall Street — But Why One Analyst Sees Downside

• MoffettNathanson initiated coverage with a neutral rating and a $131 price target, implying about 18% downside from Monday’s close.
• The firm stated that no conventional valuation model supports SpaceX’s roughly $2 trillion market capitalization and questioned several of the company’s long-term growth assumptions.
• Deutsche Bank, Bank of America and Raymond James launched coverage with highly optimistic reports, with their price targets showing an upside between 28% to 87%.

Wall Street embraced SpaceX with a wave of bullish calls on Tuesday following its blockbuster IPO. But one firm broke from the consensus. MoffettNathanson stood alone as the only sell-side research firm to forecast that Elon Musk’s rocket company will lose value over the next 12 months.

The SPCX stock was down 5.6% in Tuesday afternoon trading at the time of writing.

SPCX Gets Lone Skeptical Call

Wall Street kicked off equity research coverage of SpaceX with an overwhelmingly bullish stance following the company’s blockbuster IPO, but MoffettNathanson broke from the consensus. The research firm initiated coverage with a neutral rating and a $131 price target, implying around 18% downside from SpaceX’s Monday close of $160.42.

MoffettNathanson said even its neutral rating may be more generous than warranted.

“It would be easy – some might argue prudent – to initiate coverage with a flashing red Sell rating,” the firm wrote in a note to clients, according to a report in CNBC. The analyst stated that traditional valuation models fail to justify the premium investors are assigning to SpaceX’s dominance in rocket launches, adding that “there is simply no credible financial model” that supports the company’s current valuation.

Why MoffettNathanson Questions SpaceX’s Valuation

The firm also challenged many of SpaceX’s long-term projections. It described the company’s nearly $30-trillion estimate for its total addressable market as “absurd” and questioned forecasts for direct-to-device wireless services. The firm also said Elon Musk’s goal of deploying 100 gigawatts of compute capacity into orbit annually by the end of 2029 would exceed today’s global installed data-center capacity and require material inputs that are unlikely to exist by then.

Even so, MoffettNathanson stopped short of a bearish rating, saying investors are pricing in businesses SpaceX is yet to build. The firm added that the bigger long-term risk is potential regulatory scrutiny of SpaceX’s dominance in launch services, though it believes that threat is still years away.

Despite its skepticism, the analyst said SpaceX’s “enormous moat and undeniable flywheel” make its current valuation “perhaps not entirely unreasonable after all,” according to the CNBC report.

Wall Street’s Bullish Case For SpaceX

Most other firms took a far more optimistic view of SpaceX’s prospects.

Deutsche Bank initiated coverage of SpaceX with a ‘Buy’ rating and $255 price target, implying an upside of nearly 59% from the stock’s last close. Wells Fargo initiated coverage with an ‘Overweight’ rating and a $230 price target, implying over 43% upside from Monday’s close. Morgan Stanley also started coverage with an ‘Overweight’ rating, setting a $300 price target that suggests about 87% upside. Goldman Sachs initiated coverage with a ‘Buy’ rating and a $205 price target, implying around 28% upside.

SPCX Stock: What Stocktwits Retail Sentiment Says

Retail sentiment on Stocktwits for SPCX remained ‘bearish,’ unchanged in the past 24 hours.

One bullish retail trader said they hoped the stock wouldn’t rally before they had a chance to buy more shares, writing, “$225, $330 target price from the top brokers please don’t let it go up till I load up!!!!!”

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