SpaceX (NASDAQ: SPCX) shares have dropped rapidly in recent weeks. Investors have been able to buy in below the IPO price – at the bottom, getting the share for 50% off the share price at its peak. Has the massive fall softened the bullishness surrounding Elon Musk’s space technology company? Absolutely not!
Even with the share price as low as $110, one analyst had a price target of $800. If the boffins at Raymond James are on the money, then a £10,000 stake invested at that point would turn into £72,727 by August 2027. Is a seven-times return in a year’s time a ridiculous notion? Or is there a chance to get one of the best deals on the stock market today? Here’s what I think.
Extreme positives
First off, that rating is an extremely positive one. On the other end of the scale, we have a rating of $60. Investors would lose half their money in 12 months if that one comes true. What’s the consensus across all analysts? Around $220, which is still an impressive 51% increase on the current share price. Of course, analysts have just as many crystal balls as the rest of us.
How likely is the $800 mark? It will take some doing. For one, it would propel SpaceX to a $10trn market capitalisation, making the company the largest in the world and by some margin. For contrast, Nvidia is spearheading an artificial intelligence revolution and has only reached a measly $5trn market cap.
How will it get there, I hear you ask? Massive revenue and earnings growth, supposedly. The numbers being thrown around are for annual sales to grow 20 times until 2031. That’s from a figure of around $40bn now to $840bn by 2031. On the earnings side, the modelling is predicting a 39-fold increase in EBITDA (earnings before interest, tax, depreciation, and amortisation), from around $18bn to $700bn. Bold predictions indeed.
Worth considering?
The possibility that these wild numbers have some truth in them will likely come down to Starship. This reusable launch vehicle is taller than Big Ben and, if successful, could bring the cost of sending payload to space down massively.
In the more optimistic scenarios, the ease of delivering payloads into orbit could create possibilities like having AI data centres in space, taking advantage of solar power and heat dissipation properties from outside the Earth’s atmosphere. Another wild possibility is that of these vehicles being used for intercontinental travel. Imagine a trip from London to Tokyo taking 45 minutes – that’s one example that has been mentioned.
Is SpaceX stock worth considering? I think so, but with a big caveat attached. Without doubt, this is a high-risk, high-reward investment. I doubt too many would be surprised if the stock falls 50% in the next year, as the lowest analyst is predicting. Then again, something special might happen instead.
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John Fieldsend owns shares in SpaceX.
