Morgan Stanley Sees Massive Upside for SpaceX Despite Losses

SpaceX's stock demonstrated remarkable resilience, recovering from a 13.6% drop following its latest earnings report to surpass its IPO price. The company's earnings beat expectations, with a smaller-than-anticipated loss per share and higher sales than Wall Street predicted. This recovery occurred despite the expiration of insider lock-up periods, which allowed a significant portion of stock to be sold.

Morgan Stanley analysts, led by Adam Jonas, have expressed strong confidence in SpaceX's valuation, which stands at $1.9 trillion. Their analysis suggests that the company's non-AI operations, including Space and Connectivity, are the primary drivers of its current market value. These divisions generated $17.9 billion in sales and $8.6 billion in EBITDA over the past year.

While SpaceX's artificial intelligence division is currently incurring substantial losses, reportedly exceeding $1 billion per quarter, Morgan Stanley views this as a secondary concern. The firm's valuation model implies that the AI business is essentially provided at no additional cost to investors already valuing the core businesses. Jonas projects significant future growth for all SpaceX divisions, particularly AI.

The analyst's valuation indicates that earnings from Space and Connectivity alone support approximately 91% of SpaceX's current share price. This perspective suggests that the market is heavily discounting the current struggles of the AI division, anticipating future profitability or a strategic re-evaluation of its contribution to the company's overall worth.