KEY POINTS
- The debate over SpaceX's valuation centers on ambitious growth projections, including its estimated addressable market and future AI-related opportunities.
- Short sellers have reportedly gained billions as SpaceX shares fell from their post-IPO high, while Wall Street analysts remain overwhelmingly bullish on the stock.
One month ago, SpaceX's record-breaking $86 billion IPO made Elon Musk the world's first trillionaire. Since then, the company's share price reached a peak of $225 before sliding below the IPO price of $135.
Data published by Reuters indicates that short-sellers have made an estimated $8.7 billion on the stock's decline. CNBC reports that they hold 29% of the company's tradable shares, up from 5%-7% just a few weeks ago. Reuters' analysis of 50 high-profile IPOs indicates that companies whose share prices fell below their IPO price in the first two months went on to underperform those that did not.
Despite the slide, Yahoo Finance notes that 27 out of 31 Wall Street analysts maintain a "buy" rating on SpaceX's stock, and their average price target is $242 per share, with some firms pushing targets even higher. Only one analyst—CFRA's Keith Snyder—has a "sell" rating for SpaceX, and his target price is $115.
The divide between short sellers and Wall Street analysts raises a broader question: why do professional investors view the same company so differently?
While several of the investment banks that underwrote the SpaceX IPO also publish research on the company, a closer examination of the prospectus, and the structure of the offering suggests investors should carefully evaluate the assumptions underpinning the company's $1.78 trillion valuation.
The prospectus estimated that the company had a $28 trillion addressable market, $26 trillion of which is attributed to AI-related services. For context, SpaceX currently controls just 3.5% of the AI market, and the world's entire GDP in 2026 is estimated to be $126 trillion.
Investors are also watching SpaceX's unusually complex lock-up schedule. Fewer than 5% of the company's approximately 13 billion shares were initially available for public trading. Beginning in August, additional tranches of employee, early-investor, and institutional shares are scheduled to become eligible for sale in stages extending into 2027. The increasing supply of tradable stock represents a key risk that could drive share prices downward if demand fails to keep pace.
For now, the market remains split between analysts who argue SpaceX's long-term growth justifies its valuation, and short sellers who believe the stock still has further to fall as the company prepares for its first earnings report in August.
