Morgan Stanley Set a $300 Price Target on Elon Musk's SpaceX Stock
Key Points
Morgan Stanley is betting that Elon Musk will make AI work in space.
SpaceX ties nearly its entire addressable market to AI.
Investors won't know for years whether SpaceX will succeed, so the stock will likely remain volatile.
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Space Exploration Technologies (NASDAQ: SPCX), or SpaceX for short, has been an absolute roller coaster since going public roughly a month ago. Despite the stock rocketing to $225 and then dropping back down to roughly $125, some Wall Street analysts still see big things ahead. Adam Jonas, an analyst overseeing Morgan Stanley's coverage of SpaceX, set his base case for the stock at $300 per share.
That target signals massive upside, more than double the stock's current share price. But such an ambitious price target depends on SpaceX becoming far more than a space stock. It's a bet on unprecedented vertical integration in arguably the world's most significant economic opportunity since the industrial revolution: artificial intelligence (AI).
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SpaceX's upside lies in AI more than in space
Morgan Stanley expects SpaceX to grow at a breathtaking pace for the foreseeable future. The research assumes that SpaceX's revenue will grow from $18.7 billion in 2025 to $319 billion by 2030 and to $3.3 trillion by 2040. The bulk of that comes from artificial intelligence, where Morgan Stanley is counting on SpaceX building out orbital infrastructure for global connectivity and AI.
Image source: The Motley Fool.
Elon Musk agrees. The company's S-1 filing pegged its total addressable market at approximately $28.5 trillion, with all but $2 trillion of that tied to AI. SpaceX intends to unleash a massive constellation of AI satellites called Starmind, essentially building data centers in orbit. The company hopes to launch its first AI satellites on Starship sometime next year.
Looking at the big picture, rockets are essentially a means to build out SpaceX's AI empire in orbit.
That upside comes with immense risk
Space is truly the next frontier, especially for AI. Data centers have become very controversial in the United States, where citizens have begun pushing back hard. New York recently became the first state to impose a moratorium on new hyperscale data center builds. SpaceX successfully establishing AI infrastructure in space would be a true game changer, as no company currently seems close to replicating that model.
Elon Musk in the White House Oval Office. Image source: The White House.
At the same time, these goals are as risky as they are ambitious. That's even reflected in Morgan Stanley's research, where the bull case is as high as $600 and the bear case as low as $75. The reality is that right now, the stock's valuation reflects a lot of success that hasn't happened yet. SpaceX is trading at about 94 times last year's revenue, even after its recent slide to a $1.7 trillion market cap.
SpaceX will need to live up to Morgan Stanley's growth projections for the stock to sustain its valuation, let alone double in value. As a result, SpaceX will likely remain very volatile as time reveals where the company lands in this wide range of possibilities.
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Justin Pope 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.
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