Why Oppenheimer Analysts Are Bullish on SpaceX, the 'East India Company of Space'

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An early review of SpaceX stock is in, and it's glowing.

Oppenheimer on Thursday initiated coverage of SpaceX stock with an “Outperform” rating and a $190 price target. SpaceX shares are expected to begin trading tomorrow under the ticker “SPCX” at a $135 IPO price.

“We believe that SpaceX will use its expertise in engineering, manufacturing and space technologies to grow to the largest communications, cloud/AI company in the world,” Oppenheimer analysts wrote in a note on Thursday. They expect the company's sizable technological lead in rocket and satellite technology, its vertical integration and its scale to help it grow revenue from $19 billion last year to more than $200 billion by 2030.

The size of SpaceX's impending IPO has made it one of the buzziest events on Wall Street in recent memory. How the market reacts to its debut, expected Friday, may set the tone for mega-IPOs from Anthropic and OpenAI that could come later this year.

They see SpaceX as a leader in three distinct lines of business—Starlink and connectivity, launch and space services, and artificial intelligence—that overlap such that each unit contributes to the others’ success and lowers costs across the company. Today, Starlink is the cash cow. It grew revenue about 50% last year, accounting for more than half of total sales. Its healthy free cash flows are helping to fund the massive capital expenditures of the launch and AI businesses.

The launch business, and specifically its next-generation Starship, “is key to SpaceX’s success,” according to Oppenheimer. Starship is still in tests, but once operational it’s expected to cut SpaceX’s “cost-to-orbit” to about $100 per kilogram from about $2,700 today. Oppenheimer believes lower costs will enable SpaceX to expand its Starlink satellite constellation and make data centers in space economically viable, supporting its third business line—AI.

SpaceX puts the potential value of its AI business at $26 trillion—about 90% of its total addressable market—but it has a long way to go. AI is the company’s least mature business, with just over $3 billion in revenue last year. Its Grok model trails competitors from Alphabet, OpenAI and Anthropic in capabilities. AI is also its most expensive business, accounting for more than 60% of SpaceX’s capital expenditures last year.

According to Oppenheimer, SpaceX could build “a vertically integrated AI stack that no other company on Earth can replicate.” That full stack will consist of a foundational model (Grok); an application layer, secured through the possible acquisition of AI coding agent Cursor; semiconductors designed and made in-house as part of its Terafab project; and orbital data centers. Whether the last component is even possible is still unknown, “but SpaceX has arguably the best engineers and the company has a history of executing on tough deliverables,” says Oppenheimer.

Granted, investing in SpaceX comes with a lot of risk. Its valuation is rich, with shares priced at 100x sales. The most expensive stock in the S&P 500 by that measure, Palantir (PLTR), has a price-to-sales ratio of about 65. It’s especially pricey considering growth hinges on unproven technologies. Oppenheimer also expects the stock’s small float—less than 5% of shares will trade following its IPO—to make it volatile. And then there’s Elon Musk, who has complete control over SpaceX, runs several other companies, and “has historically had controversial political/social views” that have hurt business in the past.

These risks—especially the valuation—have some market watchers recommending investors sit out Friday's debut and wait for shares to re-enter Earth's stratosphere. Morningstar recently valued SpaceX at $780 billion, nearly $1 trillion less than what's implied by its IPO price. They expect shares to catch an updraft from investor enthusiasm and a scarcity of shares on day one, but to face resistance in the following months as new stock hits the market and investors look ahead to more blockbuster IPOs on the horizon.

But, ultimately, Oppenheimer estimates the risks pale in comparison to the galactic opportunities. They see potential for SpaceX to expand the horizons of the economy itself and pioneer industries like lunar development, interplanetary passenger and cargo transport, space tourism, and asteroid mining, just to name a few.

“Should SpaceX execute on its mission—and we believe it will—it will be the modern-day East India Company of space, controlling routes, infrastructure, and commerce of an entire frontier and giving it a quasi-sovereign reach, far beyond that of any ordinary corporation.”

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