Morgan Stanley is bullish on SpaceX: A $100 price implies the market is pricing its AI business at zero, while the rocket + Starlink business alone is sufficient to cover the current stock price, meaning the AI option value is nearly "free" at these levels.
SpaceX shares are under pressure from the looming lockup expiry, but Morgan Stanley believes this creates a valuation mispricing buying opportunity.
On Monday, SpaceX shares fell to a low of $108.66 during trading, a new all-time low, and have more than halved from their peak of $225.64. As the lockup period expiry approaches, some investors expect the stock could fall further to $100.
According to TradeUP, Morgan Stanley analyst Adam Jonas released a report stating that if the stock does drop to $100, it would imply the market's valuation of SpaceX's AI business is zero or negative, while the implied 2028 EBITDA for the rocket launch + Starlink business would be about 30% below the firm's base case.
The firm maintains an Overweight rating on SpaceX with a price target of $300. Morgan Stanley believes the divergence between current bearish sentiment and fundamentals creates an attractive entry point—at prices below $120, investors are essentially getting the option value of the company's entire AI business for "free," while the core rocket launch + Starlink business alone covers the current stock price.
Divergence Between Market Sentiment and Fundamentals
Despite no material changes in SpaceX's fundamentals over the past few weeks, bearish conviction has actually been strengthening, while bulls are increasingly waiting for clearer catalysts.
From investor conversations, the core of the disagreement lies in the pricing of the AI business. Most investors are heavily discounting or completely ignoring the value of Grok and Cursor, believing that AI monetization opportunities are primarily concentrated in the neocloud space.
Reasons include: AI business capital expenditure being too high relative to the rocket launch + Starlink business, significant uncertainty in the economic model, and management's excessive focus on this business.
Some investors even assign a negative value to AI, believing that high capital expenditure will erode overall value. Morgan Stanley disagrees, arguing that this pricing approach is too conservative and ignores multiple potential AI monetization paths.
What $100 Implies
Based on the firm's 2028 base case—revenue of $157 billion (including average 6 GW of compute power at $16.5 per watt, and 35 million average consumer users at $46 monthly ARPU), and EBIT of approximately $69 billion—if the stock falls to $100, SpaceX would trade at 18x FY28 EV/EBIT, roughly in line with the median for comparable companies, but its revenue CAGR from 2025 to 2030 is 76%, about three times the 26% median for peers.
From a cross-sectional perspective, 18x EV/EBIT would rank roughly 81st in the S&P 500 (excluding financials and real estate), in the same range as Boeing (21x), Waste Management (19x), CSX (18x), and Garmin (18x).
Breaking down further, if the rocket launch + Starlink business is valued at 40x EV/EBITDA (slightly below the space peer median of 46x), the implied value of the AI business would be exactly zero. If using a 50x multiple (slightly above the median), the AI business would have an implied negative value of $300 billion. Morgan Stanley believes both scenarios are unreasonable.
Core Business Alone Supports Current Stock Price
Even completely excluding AI value, SpaceX's rocket launch + Starlink business alone is sufficient to support the current stock price.
The firm's 15-year DCF model values the rocket launch + Starlink business alone at approximately $136 per share, using a 56x EV/EBITDA multiple. At the assumed $100 price, this implies the market is pricing the 2028 EBITDA for this business about 28% below Morgan Stanley's base case, while assigning zero value to AI.
Currently, SpaceX holds over three-quarters of the global market share in mass-to-orbit and maneuverable satellites in orbit. Its connectivity business is growing at nearly 50% this year, with an EBITDA margin of 40%. Buying SpaceX at current valuations means acquiring a space and connectivity business with a dominant market position and high growth visibility at a discount, with all AI option value essentially "thrown in for free."
From a sum-of-the-parts valuation, Morgan Stanley's base case target price of $300 is composed of: Space business $8, Connectivity business $128, X and Grok business $12, and Enterprise AI business $152.
Near-Term Positive Catalysts
On the launch front, Starship's 14th and 15th test flights are expected in September and October, respectively, potentially including the first capture of the V3 Super Heavy booster, the first orbital flight (with simultaneous deployment of operational V3 satellites), and the first capture of the Starship upper stage.
On the AI front, Grok 4.6 (a 2 trillion parameter model) is expected to be released within the next month, and Grok 5.0 (a 6 trillion parameter model) is expected later this year. The Cursor acquisition is expected to close by the end of Q3, at which point material updates on Cursor's Annual Recurring Revenue (ARR) and Grok platform adoption rates will be disclosed.
On the compute expansion front, SpaceX expects to double its computing capacity from current levels to 2 GW by year-end, which could drive more large neocloud contracts.
Given that the market is currently pricing almost no value for AI, any positive developments in these areas could serve as a catalyst for upward stock price revision.
Key Risks Cannot Be Ignored
In the near term, the stock faces dual pressures: first, the upcoming lockup expiry will bring additional supply pressure; second, the upcoming earnings report may not answer the questions investors care about most.
The bear case (target price $75) assumes: Starship delays compress the narrative, AI monetization is significantly slower than expected, the rocket launch + Starlink business accounts for over 90% of total valuation, and Starship operations are delayed to 2029.
Other major downside risks include: slowing Starlink user growth, high per-watt costs for AI infrastructure, extended AI business build cycles, equity dilution from increased financing needs, and regulatory uncertainty.
The bull case (target price $600) assumes full acceleration of Starship, orbital compute, and Terafab deployment, with AI accounting for over 60% of total valuation and compute deployment growing at a 46% CAGR.