MoffettNathanson Initiates SpaceX at Neutral, $131 PT

MoffettNathanson analyst Julie Zhu initiates coverage on SpaceX (NASDAQ: SPCX) with a Neutral rating and a price target of $131.

“Never before has so much attention been lavished on a company in advance of its IPO.

And no company, in the weeks following its IPO, has been treated to more withering scrutiny.

By now, you will surely have read umpteen articles and reports poking and prodding every aspect of the largest IPO of all time. By and large, the coverage has been split into two camps.

One camp has fawned over the sheer audacity of the enterprise and the spectacular size of SpaceX’s addressable market.

The other has relentlessly lampooned the utter ridiculousness of so many of the numbers thrown around in the company’s S-1 and analyst commentary. We’re in neither camp.

To be sure, there is plenty to poke fun at. SpaceX’s assessment of its total addressable market (TAM), at almost $30 trillion, is absurd.

So too are its forecasts for a mobility (D2D wireless) segment that is, to us, likely little more than a niche market.

Founder and CEO Elon Musk has called for launching compute into orbit at a rate of 100 GW annually by year-end 2029, an amount that exceeds global in-service data center capacity today and for which sufficient material inputs will not exist in three-and-a-half years.

There is simply no credible financial model that can support what is at the time of this writing a roughly $2 trillion valuation. Our own certainly does not.

On this basis alone, it would be easy – some might argue prudent – to initiate coverage with a flashing red Sell rating.”

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