William Blair Maintains Outperform on SpaceX

William Blair analyst Louis DiPalma reiterated an Outperform rating on SpaceX (NASDAQ: SPCX).

“After the market close, SpaceX announced that it acquired 14 MHz of wireless radiowave spectrum in the 800 MHz band.

This spectrum acquisition is aimed at addressing Starlink Mobile’s indoor coverage problem.

One of the major issues with SpaceX’s plan to become a standalone wireless carrier is that it is not clear whether its network, which is beamed from space using satellites 325 kilometers in altitude, will be able to provide coverage indoors.

During SpaceX’s first IPO analyst day at Starbase, we asked management from the first row during the main Q&A session about this exact topic.

The company indicated that indoor penetration depends on the type of building material.

At the company’s third IPO analyst day in Hawthorne, management conveyed that it was intent on finding an MVNO roaming partner to address the indoor coverage problem.

Management indicated that the issue was similar to a prisoner’s dilemma, and it was likely that one of the network carriers would ultimately come to terms.

In the event that an agreement could not be reached, management indicated that it was fully committed to building a terrestrial wireless network.

On SpaceX’s recent earnings call, the company indicated that it was moving forward with a terrestrial network that may utilize femto cells and other novel techniques.

SpaceX in today’s press release indicated that it would combine its Starlink Mobile satellites with an “advanced terrestrial deployment … that will provide a coverage layer that ensures Starlink Mobile’s signal penetrates through obstacles, such as walls, and can provide service to customers’ devices even when they are in buildings.” The incumbent wireless carriers have been vocal in expressing skepticism that SpaceX’s network will be able to match the quality of their networks.

We expect SpaceX to offer a very compelling Starlink broadband and Starlink mobile bundle. The company may also include Grok in the package.

Even though SpaceX has achieved incredible success with its neocloud business—$56 billion in annual recurring revenue leases—the company remains aggressive in looking to capture share in the wireless and wireline telecom markets.

We are incrementally positive on the Starlink Mobile opportunity following this deal. In our initiation, we discussed how SpaceX is disrupting the global telecom and cable incumbents.”

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