The brokerage believes the sharp sell-off has created an attractive buying opportunity despite growing investor concerns over heavy AI spending
SpaceX’s blockbuster IPO has quickly turned into a painful ride for investors. The stock has tumbled about 51% from its post-IPO high and slipped nearly 18% below its issue price, as concerns over heavy AI spending continue to weigh on sentiment.
Amid the sharp sell-off, Morgan Stanley has said that if SpaceX shares fall to $100, the market would effectively be valuing the company’s AI business at zero, reported Bloomberg. The brokerage believes the sharp decline has created an attractive buying opportunity despite growing investor concerns over heavy AI spending.
SpaceX shares have fallen sharply since their mid-June IPO, touching a low of $110.85 earlier this week, around 18% below their IPO price of $135.
Morgan Stanley Remains Bullish
According to the report, Morgan Stanley analyst Adam Jonas believes many investors expect SpaceX shares to decline further once the first lock-up period expires next month and insiders become eligible to sell their holdings.
If the stock falls to around $100, however, Jonas argues that the market would effectively be pricing the company’s AI business at zero or even assigning it a negative value.
“We believe the current disconnect between increasingly bearish investor sentiment and largely unchanged fundamentals creates an attractive entry point in SpaceX shares,” Jonas wrote in a note to clients, according to Bloomberg.
Morgan Stanley has a $300 price target on SpaceX, with more than half of that valuation attributed to the company’s AI business.
Why the Stock Has Come Under Pressure
Bloomberg reported that investors have become increasingly cautious about technology companies committing hundreds of billions of dollars to artificial intelligence and the infrastructure needed to support it. A weaker macroeconomic backdrop and geopolitical tensions have also weighed on sentiment towards riskier technology stocks.
Jonas said many investors significantly discount the value of SpaceX’s AI initiatives because of their high capital expenditure requirements, uncertain economics and the amount of management attention devoted to the business.
Wall Street Still Sees Upside
Despite the sell-off, Wall Street remains largely optimistic about SpaceX’s prospects. Bloomberg data cited in the report shows that nearly 80% of analysts covering the company recommend buying the stock, with the average price target of about $232 implying significant upside from current levels.
Goldman Sachs, Bank of America, Citigroup and JPMorgan Chase have also maintained buy-equivalent ratings on the stock.
Short Sellers Have Already Cashed In
The decline has also benefited investors betting against the stock. Earlier this month, Reuters reported that short sellers had amassed an estimated $15.5 billion in paper profits as SpaceX shares slipped below their IPO price.
Data from analytics firm Ortex Technologies also showed that about 360 million shares, or 56% of the free float, were out on loan, indicating that bearish bets remained elevated.
