SpaceX joins the Nasdaq 100 Index Tuesday as Wall Street brokerages launch coverage of Elon Musk’s rocket, satellite and artificial intelligence company with a clear consensus: buy the stock.
At least six brokers, including Morgan Stanley and Goldman Sachs Group Inc. have started coverage with buy-equivalent ratings, following the end of the traditional quiet period for analysts from banks that helped underwrite its $86 billion initial public offering.
Analysts are leaning into the long-term growth prospects for SpaceX, even as questions over its profitability, execution and valuation continue to linger after a blockbuster market debut. Morgan Stanley, among the biggest bulls, said the company stands to gain from demand for AI services driven by fast-growing, new industry entrants.
“While neocloud deals are the bulk of the business near term, we see end-to-end AI services as the longer-term business model,” Morgan Stanley analysts including Adam Jonas wrote in a note.
His team set a price target of $300 per share, implying an 87% gain from Monday’s close of $160.42.
Meanwhile, smaller brokerages have more extreme targets. Arete Research has a Street High of $401, while New Street Research has initiated with $165, the lowest among analysts tracked by Bloomberg.
The analyst calls matter because they give investors a framework for valuing SpaceX as more than a Musk-driven moonshot. However, sell-side analysts tend to be quite bullish on stocks — with the largest names enjoying some of the most positive ratings. For instance, Microsoft Corp. shares might have sunk about 30% from their high, but some 95% of the analysts covering the stock still have a buy-equivalent rating.
Across the 3,000 biggest US companies, buy recommendations account for 63% of all analyst ratings, according to data compiled by Bloomberg. Only 4.2% of ratings are sells, the data show.
Index Inclusion
SpaceX’s addition to the Nasdaq 100 should provide considerable support to the stock, considering the number of funds that track the tech-heavy benchmark.
Space Exploration Technologies Corp., to give the company its official name, won swift entry to Nasdaq Inc.’s main index after rule changes by the exchange operator. These adjustments allow newly listed, large-cap companies to be included in the Nasdaq 100 in as little as 15 trading days, down from the previous three-month minimum.
The stock also became a member of the Russell 1000 Index late last month, just two weeks after its IPO. Bloomberg Intelligence analyst Rob Du Boff estimated that SpaceX’s inclusion in the Nasdaq 100 and FTSE Russell gauges would drive at least $5.4 billion in buying from index-tracking funds.
Demand from passive investors might have been even greater, but S&P Dow Jones Indices, a unit of S&P Global that oversees benchmarks including the S&P 500, decided in early June to keep its existing eligibility requirements, That closed the door to fast entry by SpaceX.
“The Nasdaq 100 does not have nearly as much assets benchmarked to it as the S&P 500, but it also has some factors that juice demand for SpaceX,” said Du Boff.
The timing of SpaceX’s Nasdaq index inclusion should help minimize volatility in the stock, according to David Trainer, chief executive officer of technology research firm New Constructs. However, investors should be cautious because the company’s market valuation is detached from its fundamentals, he said.
Shares in the company, which have fallen about 29% from their all-time intraday high, were about 1.8% lower in premarket trading on Tuesday amid a broader technology selloff.
