Is SpaceX stock heading to $300 or to the moon?

Since it floated on Friday, 12 June, Space Exploration Technologies Corp (NASDAQ: SPCX) stock has become one of the hottest shares around. From their IPO (initial public offering) price of $135, the shares rocketed to peak at $225.64 on 16 June. Since then, they have fallen back to Earth. Despite this, new price forecasts are going to the moon.

Musk’s latest meme stock

At their low, shares in Elon Musk’s latest listed company slumped to $145.20 on Wednesday, 8 July. Anyone sucked into buying at the record high would have lost 35.6% of their investment in around three weeks. This shows how volatile this stock can be — and I expect this instability to continue.

As I write, SpaceX stock stands at $150, valuing this tech business at $2trn. In other words, this one outfit is worth roughly half of the total valuation of the UK stock market (around $4trn; £3.1trn). That seems incredible to me, given that SpaceX is loss-making and has tiny revenues.

In its last financial year, Elon Musk’s rockets-to-AI business reported $18.7bn of revenue and a loss of $4.9bn. Therefore, as the basic fundamentals of investing don’t apply, this is a ‘space jam tomorrow’ business.

Brokers go bonkers

After SpaceX’s flotation, brokers linked to the IPO were not allowed to release analyst coverage of the stock until this week. Here’s a list of price targets from Wall Street’s biggest firms (from high to low):

Price forecasts for the next 12 months range from $200 (+33.3%) to $300 (+100%) from the current level of $150. For me, the highest targets look mighty fishy — perhaps based on numbers plucked from the air to please the ‘Technoking’ leader of SpaceX and Tesla.

Unbelievably, Florida-based wealth manager Raymond James Financial has set a ‘base case’ SpaceX price target of $800 (+433.3%) and a ‘bull case’ of $1,000 (+566.7%). This group believes SpaceX’s yearly revenues will explode to $837bn by 2031, with EBITDA (earnings before interest, taxes, depreciation, and amortisation) soaring to $696bn.

Seriously, where do they find these bullish analysts? I can think of one easy anagram of ‘BULLISH’ plus the letter T that accurately describes Raymond James Financial’s forecasts!

In response, the cynics at the excellent Financial Times Alphaville column have set a price target for SpaceX of ∞ — that’s right, infinity. British sarcasm at its finest.

Summary

Of course, I could be wrong and Elon Musk might carry SpaceX to the moon, Mars and ‘to infinity and beyond’. SpaceX does have market-leading launch technology, plus satellite business Starlink is gaining profitability. Yet xAI’s artificial-intelligence agent Grok has been widely criticised.

With US stock prices now higher than before the great Wall Street Crash of 1929, I suspect a stock-market crash is coming to restore sanity (as in 2000/03 or 2007/09). After this collapse, I’d rather be holding the dividend-heavy FTSE 100 than SpaceX stock when the dust finally settles. For veteran investors like me, SpaceX’s valuation is one more Musk bubble waiting to burst!

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Cliff D’Arcy has no position in any of the shares mentioned.