The recent struggles are partly attributed to a scrubbed Starship test flight, which was postponed after multiple engines failed to ignite at launch. Elon Musk, CEO of SpaceX, announced plans to attempt the launch again after replacing the malfunctioning engines. The company confirmed its intention to proceed with a launch on Thursday, with a 90-minute window opening at 6:45 p.m. ET.
Despite these efforts, investors have reacted by selling off shares, leading to the stock ceasing to be a momentum stock. Analysts express concern over the current valuation, with shares trading below $123, which is $12 below its IPO price. The stock is valued at 84 times trailing revenue, and its price-to-earnings ratio is effectively infinite as the company is not yet profitable. While analysts predict profitability for next year, there is no guarantee of this outcome.
Skepticism surrounding SpaceX’s valuation was present even before its IPO. Some observers viewed the company’s ambitions as long-term goals that would take decades to realize. These initial doubts have been amplified by recent events, with some pre-IPO skeptics expressing an “I told you so” sentiment.
Market data indicates a significant erosion of market value since the post-IPO peak. The stock reached its highest valuation on the third day of trading, with the company valued at $2.64 trillion. However, it lost a substantial portion of these gains within the following week and has been on a downward trend since. Short interest in the stock has reportedly increased nearly fivefold in the past month, according to S3 Partners.
Looking ahead, a substantial number of shares, approximately 1.37 billion, are set to become available for sale two trading days after SpaceX’s second-quarter earnings report, due on August 17. This represents 20% of the company’s shares eligible for early release. Historically, large-cap companies have sometimes experienced a difficult period after their IPO before achieving significant growth, a path similar to Meta (formerly Facebook) in 2012.
Despite the current volatility, Wall Street analysts largely maintain a bullish stance on SpaceX. According to Bloomberg data, as of last week, there were 30 buy ratings, 6 holds, and only one sell recommendation. Major firms such as UBS, Bernstein, and Raymond James reaffirmed their buy ratings on Friday. The consensus 12-month price target among analysts is $235.34, indicating a potential upside of 90% from Friday’s closing price. Other analysts project a median price target of $225 over the next 12 months, with a high target of $800 and a low target of $131.
These targets suggest significant potential returns for investors. For instance, a $5,000 investment made at $125 per share could be worth approximately $5,240 at the low target, $9,000 at the median target, and $32,000 at the high target within a year. The upside potential for SpaceX is further linked to its ambitions in launching space-based data centers for artificial intelligence (AI) infrastructure, a market SpaceX estimates at $26.5 trillion.