26 Analysts Covering SpaceX Stock Rate It a Buy. Here's Why 8 Analysts Disagree

Space Exploration Technologies (NASDAQ: SPCX) stock has struggled a bit following its blockbuster IPO. But the space stock's current valuation of roughly $2 trillion still remains above its initial IPO market cap of $1.77 trillion.

On Wall Street, opinions on where SpaceX stock will go from here vary widely. Of the 34 analysts who have issued reports, 26 recommend buying, six are holds, and two suggest the stock is a sell. One analyst has an $800 price target on shares, implying more than 500% in near-term upside. Another analyst, however, predicts the stock will actually lose value over the next 12 months and suggests selling.

What has Wall Street so split on the space stock? There's one obvious factor that every SpaceX investor should understand.

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Here's why Wall Street is split on SpaceX stock

The bull case for SpaceX stock largely hinges on the company's ability to scale its artificial intelligence (AI) compute infrastructure. Morgan Stanley analysts, for example, say SpaceX's AI compute infrastructure has the potential to be faster, cheaper, and more energy-efficient than the competition. This potential has Morgan Stanley forecasting the company could be a "generational compounder that converts energy into a networked/swarming intelligence at scale."

Oppenheimer analysts, meanwhile, predict SpaceX could become the "largest" AI company on the planet. "We see it as the only vertically integrated AI company with the required capital, data, LLMs, hardware, manufacturing and engineering talent," the analysts stress.

SpaceX largely agrees with these analysts' views of the company's growth potential. In its IPO prospectus, SpaceX management noted that the company is targeting a $28.5 trillion total addressable market. Around $26.5 trillion of that total opportunity -- more than 90% -- relates exclusively to AI.

Because so much of SpaceX's long-term growth opportunity depends solely on scaling its AI business, the bearish view on shares largely deals with the potential underperformance of this division. But even factoring in AI success has left some analysts scratching their heads.

When SpaceX was preparing to go public, Morningstar analysts conducted a thorough review and concluded that the company was worth less than half of its initial IPO valuation. Morningstar settled on a valuation of just $63 per share -- far less than Morgan Stanley's current $300 price target.

Interestingly, even when Morningstar assumed more success for SpaceX's AI division, the resulting valuation still didn't indicate that shares were a buy.

"Only the most optimistic Moonshot scenario, which requires a rapidly reusable Starship and commercially competitive orbital data centers, approaches the IPO price," Morningstar warned. "The IPO price implies the Moonshot scenario is highly likely, but we think the outlook is very uncertain."

What should investors do?

I largely agree with Morningstar's analysis, even if its base case seems overly conservative. SpaceX as a business is laudable. The company has already pioneered several innovative technologies, such as its low-Earth orbit Starlink satellite network -- a business segment that is already profitable with rapid top-line growth rates. But it's fair to conclude that the vast majority of SpaceX's growth potential lies ahead. And there's simply so much we don't yet know about the pace and scale of SpaceX's growth, regardless of how the underlying markets ultimately shape up.

The core split between bullish and bearish Wall Street analysts on SpaceX stock deals with expectations for its AI business. And while SpaceX should grow tremendously in the years to come, the company's $2 trillion valuation already factors in much of that opportunity. That fact alone is keeping me on the sidelines for now.

Ryan Vanzo 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.