SpaceX $1.5 trillion value target hinges on Starlink — and Elon

The near-term investment case is that Starlink and a nascent mobile phone service fueled by its acquisition of spectrum from EchoStar Corp. provide the foundation for the outsize growth that IPO buyers will demand.

Musk’s plan, and the driving force behind his decision to pursue a faster-than-expected IPO, is much grander: orbital artificial intelligence data centers forming a distributed network in space. Musk appeared to endorse this vision, as well as Starship rockets bringing humans to settlements on Mars, and the futuristic notion of satellite factories on the moon, in a post on X late on Wednesday.

SpaceX’s IPO, then, is a bet on owning vast swaths of the space economy through the convergence of AI, robots and travel.

Will investors buy it? Skeptics aren’t hard to find. But to a number of observers, the combination of the near-term potential and Musk’s long-term outlook is irresistible and will catapult SpaceX into the realm of the “Magnificent Seven” companies like Nvidia Corp. and Microsoft Corp.

“This is an N of 1 company with limited to no real competition from the Mag 7 and it will likely have the biggest retail bid of all time,” said Jeremy Abelson, founder and portfolio manager at Irving Investors, whose firm is an investor in SpaceX. “The valuation will not, and does not need to, make sense when it comes public.”

Crown Jewel
A critical aspect of pitching a valuation north of $1 trillion in 2026 is the company’s current crown jewel: Starlink.

There could be more than one billion Starlink subscribers in 2040, the bank’s analysts estimated in October, with the unit potentially accounting for nearly three-quarters of SpaceX’s roughly $122 billion in projected sales by that time.

The fast-growing unit makes up the majority of SpaceX’s current sales, and its potential as a mobile network provider is already setting it up to take on a legacy industry similar to how Musk’s Tesla Inc. tackled the auto business.

The company has a partnership with T-Mobile US Inc. to provide satellite service to cell phone users in remote areas. It is set to increase its direct-to-mobile capacity by more than 100 times thanks in part to spectrum deals struck with EchoStar earlier this year, enabling full 5G cellular connectivity, Morgan Stanley analysts led by Adam Jonas, a long-time Musk bull, wrote in September.

The amount of spectrum in the EchoStar transaction wouldn’t be enough to provide a disruptive, competitive mobile service, Citigroup Inc. analyst Michael Rollins said in September.

For now, Starlink’s ambition to cross-sell existing carriers would offer lucrative sales opportunities without the investment burden of competing with them directly, according to Morgan Stanley.

Eventually, Starlink could “theoretically beam into every cell phone on planet Earth,” resulting in an “almost an unlimited total addressable market,” said Ali Javaheri, an emerging technology analyst at PitchBook, in an interview.

Investors are similarly bullish on the company’s near-monopoly on the business of sending things to space, counting NASA and the US Department of Defense among its customers. Even AST SpaceMobile Inc., an upstart rival to Starlink, relies on SpaceX’s Falcon 9 rockets to get its satellites in orbit.

Despite that dominance, Morgan Stanley believes launch will account for less revenue in the coming decades. The company’s developmental Starship rocket will eventually take the baton for launches from the Falcon 9. Musk promises it will do everything from launching satellites to shuttling people to the moon — which NASA has awarded SpaceX contracts worth roughly $4 billion to do.

SpaceX’s current dominance of internet from low-Earth orbit and the launch business, paired with dreams of data centers in space and frequent trips to Mars, could make the timing of an IPO “as good as it gets,” according to Bloomberg Intelligence analyst George Ferguson.

That’s not necessarily an endorsement.

Frothy Market
Ferguson expects competition to grow, and pointed to Blue Origin LLC, the company founded and bankrolled by Amazon.com Inc. founder Jeff Bezos, among the companies that could see success in the coming years to close the gap.

By that logic, there’s no time like the present for a public listing.

“The more you sit on it, the more other companies can build, have success launching into space, and the less people will value you as if you’re a one of a kind company,” Ferguson said in an interview.

SpaceX’s leadership in space, in an environment where “valuation sensitivity is not high,” means the company will have “a significant amount of latitude” to live up to expectations as a publicly listed company, said Evelyn Chow, portfolio manager of Neuberger Berman’s Next-Gen Space Economy strategy.

It would need a lot.

A massive IPO is designed to fund the development of Musk’s plan for space-based data centers, as Bloomberg reported. That wouldn’t assuage practical concerns raised by Morgan Stanley analysts, who caveated the list of potential benefits such as the low temperatures in space and abundant solar power, with challenges that include maintenance in orbit and radiation requiring specialized hardware.

Market timing could also work against a listing, especially if institutional investor concern around potential overspending on AI gets more serious.

Aviation analyst Rob Stallard sees SpaceX’s IPO calculation as a “sure sign that the equity market is frothy.” With its expected $15 billion in sales this year, a $1.5 trillion valuation would add up to “a mere” 100 times revenue, Stallard said.

Even at the $800 billion valuation being weighed in SpaceX’s latest insider share sale, the company would be larger than the combined market caps of the six largest US defense firms, and would trail just 12 members of the S&P 500 Index, Morgan Stanley said.

“Valuation is subjective, unless you’ve got a voting public that determines your price,” said Chris Quilty, co-CEO and president of Quilty Space, a space research firm. While SpaceX’s board is nominally choosing the target, “In essence, one person, Elon Musk, could set that valuation.”

Indeed, as with all of his ventures, valuation discussions ultimately lead back to the founder himself. Some see it as the ultimate key man risk; PitchBook’s Javaheri called Musk’s track record of building successful companies the “Elon premium”.

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Regardless of the sum-of-the-parts model analysts use to estimate the fair value for SpaceX, the lack of direct rivals — and the Elon factor — will make any valuation “hard for investors to wrap their heads around,” according to Irving Investors’ Abelson. That ambiguity can work to the company’s advantage.

“What better time to go to market with this, at a time when you don’t know if data centers in space work, you don’t know if you can mine the moon, a trip to Mars seems possible?” said Bloomberg Intelligence’s Ferguson.

“There’s no better time than now, when there are all of these possibilities.”