Morningstar Challenges SpaceX Valuation Ahead Of IPO
Morningstar has placed a valuation of $780 billion on SpaceX, a figure that sits well below the valuation the company is reportedly seeking through its upcoming initial public offering. The assessment arrives just days before the Elon Musk-led company is expected to begin its investor roadshow.
While market enthusiasm around the listing remains strong, Morningstar has taken a more cautious stance. The research firm argued that several assumptions underpinning the company’s growth prospects may be overly optimistic, particularly in relation to its artificial intelligence operations and future technology initiatives.
Concerns Over AI Business Prospects
Morningstar highlighted uncertainty surrounding SpaceX’s artificial intelligence activities, which include xAI and social media platform X. According to the firm, the economics of the AI business remain unclear, while competition from established rivals continues to intensify.
Morningstar equity analyst Nicolas Owens said the chatbot Grok, developed by xAI, is not currently among the leading AI models. As a result, the firm questioned whether the business can justify the expectations embedded in the company’s targeted valuation.
Furthermore, Owens noted that the long-term potential of the AI segment depends heavily on technologies that have yet to prove their commercial viability. Among those concepts are orbital data centres, which remain largely untested.
Starlink Faces Technology Challenges
Morningstar also expressed reservations about Starlink, SpaceX’s satellite broadband business. Although Starlink has become a major component of the company’s growth story, the firm believes it still faces significant technological challenges.
In addition, Owens suggested that several of these hurdles may fall outside the company’s direct control. Consequently, Morningstar argued that investors should carefully assess the risks attached to future expansion plans.
The firm stated that it believes SpaceX has been significantly overvalued. Therefore, investors may find more attractive entry points after the public listing rather than during the initial offering period.
IPO Momentum Remains Strong
Despite its cautious outlook, Morningstar acknowledged that the stock could perform well shortly after listing. A relatively limited public float and support from prominent investment banks could help drive early demand.
SpaceX is expected to launch its roadshow on June 4, while the company’s shares are scheduled to begin trading on the Nasdaq on June 12, according to Reuters reporting.
Several major financial institutions are underwriting the offering. These include Goldman Sachs, Morgan Stanley, BofA Securities, Citigroup and J.P. Morgan.
Meanwhile, SpaceX is reportedly targeting a valuation of $1.75 trillion through the IPO. The company was most recently valued at $1.53 trillion on secondary trading platform Forge Global.
Even so, Morningstar maintained that long-term investors interested in SpaceX’s future opportunities may eventually gain exposure at prices offering a greater margin of safety than the IPO is likely to provide.
With inputs from Reuters