The Space Exploration Technologies Corp (NASDAQ: SPCX) listing on the US tech-heavy Nasdaq exchange was among the most anticipated stock debuts in history, but now that the dust is starting to settle, the question of what the real value of the company's shares is has arisen.
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Investors in SpaceX betting the company can deliver
Part of the difficulty in valuing the company is that of its three divisions, only the connectivity division, which operates the Starlink internet service, is turning a profit at the moment.
While they have large aspirations, the space and AI divisions are still burning cash, even though they are already generating significant revenue.
UBS has run the ruler over the company, and in a note to clients published this week, it sets out a positive investment thesis for SpaceX shares.
Interestingly, the UBS team says that as the company brings its Starship rocket system into service, the total addressable market for the company could increase to US$30 trillion.
UBS added regarding the company:
We view SpaceX as an unparalleled set of assets with a multifaceted return profile and multiple drivers of upside for long term, risk tolerant investors. Starship – the most advanced heavy-lift, re-usable rocket – is the foundational technology that unlocks opportunities in launch, communications and AI compute creating a total addressable market nearing US$30T. Starship would effectively give SpaceX commercial control over access to space for the next decade, and we expect revenues/EBITDA to grow at a ~70%/90% CAGR through '31 to US$660B/US$512B as opportunities in AI and connectivity scale and rapid reusability drives the launch cost per kilogram to just $200 from $1K currently ($50K for the space shuttle).
UBS said while it was not factored into their base investment case, the company was "uniquely positioned to exploit off planet business models as they emerge, providing investors a call option as Elon Musk looks to fulfill his vision of making life multiplanetary''.
The broker said the Starship rocket system was five times larger than SpaceX's Falcon 9 reusable rocket, which would dramatically improve the cost of getting into orbit.
Starship would then feed into the Starlink business, UBS said, enabling the deployment of next-generation satellites, "super-charging the business with 10x the capacity per satellite at about 1/10th the cost''.
UBS also noted that the company's AI division already had contracts with Anthropic and Alphabet, "while inexpensive access to space opens up the market for orbital compute''.
Massive new markets await
UBS added:
Longer term, we believe the company could exploit other opportunities created by its control of cheap access to space including travel, cargo, orbital manufacturing and access to the lunar (and eventually, Martian) surface. While difficult to quantify, we believe these opportunities will come into focus over the next several years and become a key driver of the shares despite their lack of reference in our 5-year model.
UBS has a price target of US$210 on SpaceX shares.
