Summary of Key Points
After SpaceX's listing, its stock price has experienced significant fluctuations. The valuation estimates provided by two Wall Street institutions differ by more than double (New Street: $165 vs Morningstar: $63). At heart, this reflects a clash between two different valuation approaches: one bets on "long-term vision" (directly incorporating future potential such as AI and orbital computing power into the current value), while the other focuses on a "prudent reality" (only recognizing proven businesses and discounting the likelihood of future possibilities). The disagreements center around three main areas:
1. Whether AI computing power should be priced in advance.
2. Whether Starlink represents a global communication revolution or a niche business.
3. Whether to use growth multiples or cash flow probabilities to estimate the future value.
Currently, the market is more inclined towards the "vision," but this belief depends on subsequent technical validations (such as the reuse of Starship and the generation of AI cash flows). Otherwise, it could backfire.
I. Valuation Logic: Betting on the Future or Making Practical Calculations?
The difference in valuation between New Street and Morningstar stems from their different attitudes towards the "unfamiliar future":
- New Street's 'Vision-Based Pricing': They view SpaceX as a "space + AI infrastructure platform." Regardless of whether the technologies are fully implemented, they include potential future values (such as orbital AI computing power and Starlink connecting to phones) in the current price. It's like buying a house without a subway connection and paying based on the expected value after the subway opens, betting on future potential.
- Morningstar's 'Prudent Valuation': They only consider proven profitable businesses (such as rocket launches and existing Starlink services). Future projects like AI and orbital data centers are discounted based on their success probabilities. For example, since Musk has mentioned plans for orbital computing power, Morningstar estimates a 7% chance of success, assigning only 7% of the total value to this aspect.
In simple terms, one is a "dreamer," and the other is an "accountant."
II. AI Computing Power: Core Asset or Uncertain Option?
The biggest disagreement between the two institutions lies in their assessment of AI:
- New Street: They regard AI as SpaceX's future source of revenue. They predict that by 2030, AI will account for 65% of total revenue ($127.7 billion) and estimate a potential additional value from orbital data centers and integrated platforms (nearly $1 trillion). Their reasoning is based on Musk's claims that Starship could deliver 1 million tons of payload annually, each carrying 100 kW of computing power, leading to 100 GW of space-based AI capacity. They directly translate this vision into a current value.
- Morningstar: They see AI as a speculative investment. They believe that orbital computing power requires two technological breakthroughs (high-frequency reuse of Starship and commercialization of orbital data centers), which are uncertain before 2028. Even in the best-case scenario (if AI becomes a reality), the value is only $1.3 trillion, with a 7% probability of success; thus, the AI component's valuation is nearly negligible.
Disagreement: Should we pay for AI now, or wait until its potential is realized?
III. Starlink: Global Communication Revolution or Niche Business?
Starlink is SpaceX's most profitable service, but their views on its potential are vastly different:
- New Street: They believe Starlink can revolutionize global communications. They highlight the "Direct-to-Cell" technology, which allows phones to connect directly to satellites without additional equipment. This could expand Starlink's market beyond remote areas to emergency communications and partnerships with telecom operators, potentially challenging traditional telecommunications services. As a result, they estimate Starlink's value at $650 billion, significantly higher than its current revenue.
- Morningstar: They see Starlink as a niche business. They point out physical limitations of satellite communication (signal latency and bandwidth constraints), suggesting it can only complement terrestrial 5G/4G services in specific use cases (remote areas, aviation Wi-Fi, vehicle connectivity). Their estimated total revenue by 2035 is $56 billion plus $24 billion from direct phone connections.
Disagreement: Is Starlink a disruptor or a complementary technology? New Street believes it's a disruptor; Morningstar thinks it's more of a complement.
IV. Valuation Method: Growth Multiples or Cash Flow Probabilities?
The two institutions use different methods to estimate the future value:
- New Street: They apply growth multiples, predicting SpaceX's revenue at $195 billion and profit at $65 billion by 2030, then using a 35x PE ratio (higher than mature tech companies like Google) to arrive at a valuation of $2.3 trillion. This approach focuses on potential future earnings.
- Morningstar: They use cash flow discounting and probabilities, first calculating the future cash flows from proven businesses (rocket launches and current Starlink revenue) and then adjusting for uncertainties in future projects (AI, orbital data centers). This approach emphasizes the likelihood of actual cash inflows.
In simple terms, New Street focuses on potential earnings, while Morningstar focuses on the probability of generating those earnings.
V. Market Situation: Buying into Vision, but with Risks
The current stock price ($160) is close to New Street's estimate ($165), indicating that the market is willing to pay for the vision:
- Why? Musk's past achievements (Tesla, PayPal) have led the market to believe in his ability to turn the impossible into possible, so they are willing to pay a premium for his next venture.
- Risks:
1. Overestimation: New Street separates the values of AI, orbital data centers, and platform synergies, which may overlap (e.g., AI requiring data centers). This could lead to overestimating the overall value.
2. Validation Risks: If Starship fails to achieve high-frequency reuse, Starlink's user growth slows, or AI generates no cash flows, market sentiment could quickly turn negative, leading to a sharp drop in the stock price.
Conclusion: The valuation differences around SpaceX reflect the question of "how much of the future should be paid for now." The market is currently buying into its vision, but whether that vision will translate into actual profits depends on future technological developments.
(Note: This analysis does not constitute investment advice. The market is volatile, and investments carry risks.)