Space Exploration Technologies (SPCX -1.36%) is one of the more controversial stocks on the market, and that shows up in analysts' assessments. The range of 12-month price targets they've put on the stock forecast everything from significant losses to massive gains. According to Yahoo! Finance, the lowest price target among analysts covering the company is $117, while the highest -- from Andrew Beale at Arete Research -- is $450.
Beale's target suggests the stock will about a triple from today's level. That's a monster growth target, and would lead to SpaceX being valued at around $6 trillion. That's a huge difference from today's $2 trillion company, but is this a legitimate price target or just an outlier intended to grab attention?
Image source: The Motley Fool.
Beale's prediction doesn't care about rockets
SpaceX operates in three segments: space exploration, connectivity, and AI. While space exploration may be SpaceX's ultimate goal, it isn't what's supporting the business right now. Connectivity, mostly through its Starlink satellite broadband platform, is its only profitable segment. Beale's thesis hinges on Starlink further improving its margins and expanding.
NASDAQ: SPCX
Key Data Points
Additionally, it focuses on SpaceX's AI endeavors. A few months before the company went public, SpaceX acquired AI firm xAI -- another Elon Musk company that developed the Grok large language model. While connectivity may provide the profits, xAI provides a huge amount of growth. During Q2, xAI generated an impressive 213% growth rate. Beale's thesis points to this business becoming a huge revenue driver.
But could it be enough to lift the stock to $450 per share?
I don't think so.
SpaceX is already richly valued at around $152 per share and a $2 trillion market cap. This year, Wall Street analysts expect the company to book $44.7 billion in revenue. That values the stock at nearly 45 times this year's sales. Even if SpaceX could snap its fingers and have a 50% profit margin -- an unusually high margin -- that would leave it trading at 90 times earnings -- making it among the most expensive big tech companies out there.
That's based on today's business and a speculative idea of potential profits. And right now, it's operating in the red. There are no earnings to measure it by. If SpaceX triples toward Beale's price target, that would further exaggerate its already high valuation. First, SpaceX's business needs to grow into the company's current market cap. So while the $450 price target may be applicable in a decade, I think it's a bit outlandish to consider as a short-term price target.
