The bull and bear case for SpaceX's IPO valuation
The most valuable private company is about to go public, but will investors baulk at the price tag? We explore the bull and bear case for SpaceX’s IPO valuation.
SpaceX is about to hit the public markets for the first time, and when it does so it is likely to instantly transform from the world’s most valuable private company to one of the ten most valuable of any type.
The question that will always raise its head at any initial public offering (IPO) is the price at which it sells.
IPOs are often an opportunity for founders and long-term investors to cash in on the efforts they have put into its growth, and the risks they have taken along the way. Because of this, value-focused investors, including Warren Buffett, the chairman and former CEO of Berkshire Hathaway, have tended to eschew them – the logic being that these company insiders will time their exit to coincide with the moment when they will receive the highest value for their shares.
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It’s overly cynical to apply this logic wholesale. The same reasoning could be applied to any purchase or sale of any asset; if you buy a stock or fund on the open market, the person you are buying it from probably knew about it before you did, and probably thinks that now is as good a time as ever to sell.
In SpaceX’s case, existing shareholders (including founder and CEO Elon Musk) will also have to hold their shares for 366 days after the listing before selling. The funds raised will go back into SpaceX, enabling it to accelerate its growth plans.
But given that SpaceX looks set to IPO with a valuation of over $1.75 trillion – likely making it the seventh or eighth most valuable company in the world – much scrutiny has been applied to whether or not the $135 per share price tag it is targeting makes sense for investors.
You shouldn’t invest in any asset without carefully considering the risks involved and deciding whether or not it matches your current position. Below, though, we explore the bull and bear cases behind the valuation of one of the most talked-about companies of the year.
SpaceX’s valuation: the bull case
In its IPO prospectus, SpaceX claimed to have identified “the largest actionable total addressable market (TAM) in human history”.
The TAM – effectively the entire economic opportunity the company believes it could eventually address – totals $28.5 trillion, which is a little below the GDP of the US in 2024 (28.8 trillion). This breaks down into three categories:
- Space, including space-enabled solutions (in other words, SpaceX’s rocket launch services): $0.37 trillion.
- Connectivity, including Starlink Broadband and Starlink Mobile: $1.6 trillion.
- Artificial intelligence (AI), which includes AI infrastructure, consumer subscriptions, digital advertising and enterprise applications: $22.7 trillion.
Last year, SpaceX generated revenue of $18.7 billion. The TAM that it has laid out implies that it has the potential to increase this number more than a thousand times over – though there is no specific timescale over which this could happen. The prospectus outlines various risks that could restrict its ability to reach this market, including the fact that many of the required initiatives “involve significant technical complexity, unproven technologies or technologies that do not exist, and such initiatives may not achieve commercial viability”.
Regardless, bulls argue, there is a huge growth opportunity at play here – perhaps even a better opportunity than that posed by any other company on the planet, given that SpaceX operates at the intersection between space and AI, two of the most groundbreaking, forward-looking themes of our age.
Dan Coatsworth, head of markets at AJ Bell, said: “There is no other company doing what SpaceX does on the same scale, which could be a key appeal to existing and potential investors.
“Space excites people because it is the great unknown and SpaceX has a blueprint to turn dreams into dollars.
“SpaceX boss Elon Musk is a visionary and despite polarised views towards him, the CEO does seem to get things done. The Starlink satellite services arm makes SpaceX interesting because it provides recurring revenue, meaning there is a constant flow of money coming into the business to keep the lights on while it works on big picture ideas like colonising Mars.”
According to people familiar with the matter cited by the Wall Street Journal, Morgan Stanley and Goldman Sachs analysts both project that SpaceX’s revenue will near $160 billion in 2028 – almost ten times its level in 2025.
“Bulls might argue SpaceX’s earnings growth potential is so great that valuing it using 2027 or 2028 forecast earnings could make the equity rating look less rich,” said Coatsworth.
SpaceX’s valuation: the bear case
Hard-nosed investors might view the arguments above with a degree of scepticism.
While SpaceX has outlined an opportunity thousands of times larger than its current revenue, there are a lot of uncertainties involved in reaching it. In the meantime, its shares are going on sale at close to 100 times the revenue it made last year. That limits the potential for upside growth, and increases the potential for the shares to fall in value, should SpaceX’s future growth not go according to plan.
Analysis from investment research firm Morningstar estimated the fair value for SpaceX shares at $63 – less than half the price tag that SpaceX is targeting at its IPO.
“Investors are naturally excited about the SpaceX IPO, but with investment bankers suggesting a $1.75 trillion valuation, we believe it's overvalued,” said Michael Field, chief equity strategist at Morningstar. “We believe the business has real strengths, particularly in Starlink, but with so many unknown and untested technologies underpinning much of the valuation price, particularly within the AI business, we think the valuation is extremely speculative.”
Morningstar was also bearish on the opportunity for Starlink. While SpaceX estimated the service’s TAM at $1.6 trillion, Morningstar estimated that $129 billion is a more reasonable figure given technical constraints and the fact that Starlink will find it harder to compete in dense urban telecom markets.
In one scenario, though, Morningstar suggested that SpaceX might be undervalued at its IPO. Its most optimistic ‘moonshot’ scenario valued SpaceX at $1.97 trillion, or $154 per share – but the company only assigns a 7% probability of this scenario playing out.
AJ Bell’s Coatsworth noted other risks that could apply to SpaceX over time, including share price dilution if its ambitious plans require further rounds of fundraising, as well as unanticipated setbacks such as launch failures or regulatory changes.
