Key Points
Space Exploration Technologies (NASDAQ: SPCX) recently went public in what may have been the most anticipated IPO ever. It didn’t disappoint. The stock performed well on its debut and in the subsequent days, even rising to the fifth-largest company on the market at some point. A slew of analysts have weighed in on the stock. There are currently at least 29 firms covering the company, and the overwhelming majority have highly positive opinions and average price targets that imply healthy upside from current levels. Perhaps the most surprising price target of them all came from Brian Gesuale, an analyst at Raymond James (NYSE: RJF). Here’s just how bullish Gesuale is on SpaceX’s prospects.
Everything would have to go right
SpaceX is looking to tap into transformational opportunities. Within its space segment, the company has already made breakthroughs with its pioneering partially reusable rockets, which have significantly decreased the cost of space travel. This success has helped fuel some of the company’s other businesses. For instance, the company’s Starlink, which offers internet connectivity through a constellation of Low Earth Orbit (LEO) satellites, is by far the leader in this niche, with more satellites in orbit than any of its competitors — a feat it achieved largely through innovations in space travel.
SpaceX is now looking to go even further, literally and figuratively. The company’s next-gen rocket, Starship, is fully reusable, unlike its current flagship rocket, Falcon 9, which is only partially reusable. Starship can also carry much larger and heavier payloads. SpaceX is counting on Starship to reach Mars, significantly increase the number of satellites in orbit — thereby improving its Starlink business — and eventually build data centers in space. Substantially lower space-travel costs could also make space tourism profitable. If the company can realize this vision, or something close to it, the stock could indeed deliver life-changing returns, and maybe that’s exactly what Gesuale thinks will happen.
That may explain the $800 price target the analyst set for the stock, which represents an upside of almost 482% from current levels.This is an aggressive price target, even by Wall Street’s standards, which has been extremely bullish on SpaceX since the company went public.
Should you buy SpaceX stock?
SpaceX is a highly innovative company that leads its space and Starlink segments and arguably benefits from a moat, as its vertical integration has helped it drastically reduce expenses. Given the opportunities ahead, it makes sense to keep the company on your watch list. However, there are significant risks with the company, one of which is that some of SpaceX’s success may already be baked into the stock price. The company isn’t worth about $2 trillion because of its financial results. In terms of revenue, earnings, and free cash flow, SpaceX pales in comparison to similarly sized corporations.
That means the stock may fall sharply at the first sign of trouble. Further, many of SpaceX’s ambitions depend on its Starship rocket, which is still in test flight. The company needs these tests to go well. So far, they have. But if Starship encounters any trouble, many of SpaceX’s plans will be in question. Meanwhile, Starlink is SpaceX’s most important business, accounting for all of its operating profit in the fiscal year 2025. However, Starlink’s average revenue per user has been declining over the past few years.
As competition intensifies, the company could see slowing growth in this business, which might become a major problem. Lastly, SpaceX faces significant regulatory risk, given that contracts from the U.S. federal government accounted for about 20% of its revenue last year. This could change with new administrations and impact the company’s financial results. For all those reasons (and more), SpaceX is a fairly risky stock. My view is that the $800 price target is far too aggressive, and the company isn’t a buy at current levels.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
