SpaceX shares, which drew attention for the largest initial public offering (IPO) in history, struggled on their first day of inclusion in the Nasdaq index. Weakness in tech stocks kept the stock above its IPO price but below both its peak and opening price. Still, brokerages issued positive outlooks based on the company's growth momentum.
According to The Wall Street Journal on Monday, SpaceX shares closed at $149.47, down 6.8%, on their first day of inclusion in the Nasdaq 100 index. The decline reflected broad weakness across tech stocks. The price stayed above the $135 IPO price but fell below its peak of over $200 and the opening trading price of $150 set on Nov. 12.
Investors had expected inclusion in a major index to lift the stock. Mutual funds and exchange-traded funds (ETFs) with roughly $800 billion (about 1,203 trillion won) in assets under management were expected to buy SpaceX shares to track the Nasdaq 100. The expectation was that this reliable source of demand would push the stock higher.
However, analysts warned that buying tied to index inclusion may already have been priced in. SpaceX shares rose about 6% last week. Jay Hatfield, CEO of Infrastructure Capital Advisors, said, "Hedge funds and short-term investors were targeting the Nasdaq inclusion." He added that the broad weakness across the Nasdaq that day also weighed on the stock.
Weighed down by semiconductor stocks, the Nasdaq Composite Index fell 1.2% that day. The S&P 500 dropped 0.4% and the Dow Jones Industrial Average fell 0.2%. Meanwhile, West Texas Intermediate (WTI) crude futures surged late in the afternoon after the U.S. Treasury revoked a waiver on Iran's oil sales.
Wall Street Uniformly Rates SpaceX 'Buy,' Sets Target Up to $300
Wall Street's outlook on SpaceX remains positive. According to the Financial Times, SpaceX received a series of "buy" ratings from major Wall Street brokerages. Goldman Sachs, UBS, and Morgan Stanley issued bullish views that day. It marked the first coverage from the banks that underwrote last month's large IPO.
Morgan Stanley set a target price of $300 with an "overweight, attractive" rating. Deutsche Bank offered a target price of $255. They cited a "clear advantage" in reusable rockets, satellite internet, and the deployment of space artificial intelligence (AI) infrastructure. Citi described its year-end target of $200 as "a milestone on the way to more than $900." It added, "The successful deployment of Starship will be the cheapest and most scalable path to unlocking the economic potential of space."
UBS described the reusable rockets and Starlink satellite network as "unrivaled assets" and set a 12-month target price of $210. Goldman Sachs initiated coverage with a buy rating and a target price of $205. Goldman said, "SpaceX is well positioned to expand differentiated strengths across space (launch and reuse), connectivity (broadband and mobile satellite constellations), and AI (computing)," adding, "each market has the potential to grow to trillions of dollars over the next five years and beyond."
Bank of America offered a target price of $235. Based on next year's expected earnings, the price-to-earnings ratio (PER) is 118 times, falling to 43 times by 2028. By contrast, the forward PER of the Nasdaq 100 index, into which SpaceX was added, is 23 times.
Many analysts acknowledged the uncertainty of their outlooks. Morgan Stanley set a wide stock price range of $75 in a bearish scenario and $600 in a bullish one. JP Morgan set a target price of $225, citing "Musk's enormous influence and control as the key to success." The report carried the subhead, "There is only one Musk."
Goldman Sachs, while noting that SpaceX "has a track record of developing solutions that many industry experts previously considered impossible," estimated that debt financing would be needed. Goldman Sachs set a buy rating and a 12-month target price of $205 for SpaceX. It estimated that achieving this would require about $270 billion in debt financing by 2030.
Signs of unease were also detected among investors. SpaceX issued its first corporate bonds shortly after last month's IPO. It sold $25 billion (about 38 trillion won) in bonds to refinance bank loans. The sale initially appeared to go smoothly. But the bonds plunged in the secondary market to levels investors rarely see. As a result, the yield premium (spread) over U.S. Treasuries rose. According to MarketAxess, as of Dec. 6, the spread on bonds maturing in 2036 was 1.65 percentage points, up from an initial 1.4 percentage points.
SpaceX holds an investment-grade credit rating, with a market capitalization of about $2.1 trillion (about 3,158 trillion won) and more than $100 billion (about 150 trillion won) in cash. However, Davis Hebert, managing director at CreditSights, said, "Investors face major uncertainties, including how much cash SpaceX will burn and how much it will borrow going forward."
A $900 share price would imply a value of about $12 trillion (about 18,047 trillion won), far exceeding Nvidia (about $4.7 trillion), the world's largest company. With SpaceX's inclusion in the Nasdaq 100, index-tracking funds must buy the stock. While companies typically must wait one year after listing, SpaceX received approval for early inclusion from Nasdaq, FTSE Russell, and MSCI.
