SpaceX (NASDAQ:SPCX) stock saw out the week on a high, surging by 16% in Friday’s session, clawing back some of the losses it had accumulated since hitting its post-IPO peak on June 16.
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Two ETFs for long or short leverage on SPCXThe move higher followed Thursday’s closely watched lockup expiration, which passed without sparking the heavy selling many shareholders had anticipated. Even so, the stock still has significant ground to recover, sitting 34% below its highs.
Is it destined to reach those levels again soon or will the downward pressure resume shortly? For now, there is no way to know. Indeed, top investor James Foord believes SpaceX is “arguably the most binary bet on the stock market right now.”
“With the right combination of sentiment, macro, and earnings, this could skyrocket to new highs in the next year,” Foord, who ranks among the top 3% of investors on TipRanks, said. “Alternatively, we could see a painful move down as early investors unload, and the market moves away from the AI trade. There’s no in-between here; it’s all or nothing.”
SpaceX is “all or nothing,” says Foord, because its valuation hinges largely on whether its AI ambitions translate into substantial revenue.
The 5-star investor notes that SpaceX currently carries a ~$1.43 trillion valuation against an annualized revenue run rate of about $31 billion. However, management believes the company could reach $100 billion in annualized revenue by year-end, including contributions from Cursor. At that level, the stock would trade at roughly 14 times revenue – a valuation that “doesn’t sound ludicrous” to Foord.
The bull case rests heavily on AI infrastructure. SpaceX ended the second quarter with 1.4 GW of compute capacity and is targeting 15 GW by the end of 2027. Even using more conservative assumptions, Foord estimates that 10 GW of monetized capacity at $30 million per MW could generate $300 billion in annual AI revenue. Combined with Connectivity revenue potentially exceeding $30 billion, he believes Musk’s $1 trillion revenue target for 2030 could be achievable. At an 8-times sales multiple, that would imply a company worth around $2.5 trillion.
The bear case is very different, however. SpaceX added 0.4 GW of capacity in Q2 while spending $15.8 billion on capex. At current AI economics of roughly $6.3 million per MW, each gigawatt would generate only $6.3 billion in annual revenue against approximately $40 billion of capex – a potentially unattractive return given the hardware’s useful life, or as Foord puts it: “that would be massive value destruction.”
Without assigning a premium to AI, Foord values the remaining Connectivity and launch businesses at roughly $250 billion to $350 billion, equivalent to around $20 to $27 per share vs. approximately $110 today.
Bottom line, the 5-star investor sees two dramatically different outcomes: a potentially $250-per-share company if the AI thesis plays out, or roughly $25 per share if it fails.
“Ultimately,” Foord summed up, “a bet on SpaceX is a huge bet on AI.”
While he sees demand remaining strong, he notes that rising capex is no longer being rewarded and believes weaker sentiment could fuel insider selling.
As a result, Foord currently rates SpaceX a Hold (i.e., Neutral). (To watch Foord’s track record, click here)
On the Street, 5 analysts are also skeptics, yet an additional 24 Buys and 2 Sells all add up to a Moderate Buy consensus rating. Going by the $229.54 average price target, shares will be changing hands for a 72% premium a year from now. (See SPCX stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.