SpaceX (SPCX) stock is heading toward another lock-up date, but one analyst sees a steep drop ahead. In a new report today, Phillip Securities analyst Glenn Thum reiterated a Sell rating on the stock and a $75 price target, indicating about 46% downside from current levels. His target is well below the stock’s recent price near $140.
The warning comes even after SpaceX reported a 92% jump in second-quarter revenue to $7.8 billion. Thum is more concerned about the quality of that growth. He wrote that the AI revenue driving recent gains is “the least durable” part of the business.
Thum is a five-star analyst on TipRanks, ranked #503 among the 12,474 analysts tracked. His ratings have an 89% success rate and an average return of 20.80%.
Why Is the Analyst Bearish on SpaceX?
Thum believes SpaceX’s AI revenue needs to prove it can last before the stock can support a higher value. AI revenue rose 247% year over year in the second quarter. About $1.6 billion came from the first ramp of cloud service deals signed during the quarter.
The problem is the terms of those deals. Thum noted that the cloud contracts charge monthly fees and can be ended with 90 days’ notice after the first ramp. One AI customer also accounted for 19.5% of SpaceX’s total revenue in the second quarter. That was up from less than 10% a year earlier.
“A re-rating requires these compute contracts to be converted into multi-year commitments,” Thum wrote. That gives investors a clear point to watch. SpaceX needs to turn its early AI demand into longer contracts before Thum sees enough proof to change his view.
SpaceX Is Spending Heavily on AI
SpaceX is also spending at a very high rate to build its AI business. Capital spending reached $18.4 billion in the second quarter. That was about 2.4 times the company’s revenue for the period.
Thum expects spending to stay around that level for the next two quarters. SpaceX also plans to increase its compute capacity to more than 2 gigawatts by December. That would be up from 1.4 gigawatts in June.
But while the spending could support much higher AI revenue in the future, it also puts pressure on the company’s cash flow for now.
Another Lock-Up Is Coming on August 20
The next share unlock adds another source of uncertainty for SPCX stock. About 320 million restricted shares are expected to become eligible for transfer on August 20.
SpaceX already passed a much larger share release earlier this month. About 911.5 million shares became eligible for sale on August 6. Yet the expected wave of selling did not hit the stock. SpaceX instead moved back above its $135 IPO price.
The August 20 release does not mean all those shares will be sold. Still, it gives early investors another chance to take profits. More unlocks are also scheduled later this year.
Is SpaceX a Good Stock to Buy?
On TipRanks, SPCX has a Moderate Buy consensus rating based on 24 Buys, five Holds, and two Sell ratings. The average SpaceX price target of $232.35 implies 65.96% upside potential from current levels.
