Morgan Stanley: If SpaceX falls to $100, it means its AI business is valued at zero.

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Morgan Stanley analysts said that SpaceX’s stock price has dropped recently to a level that suggests investors are giving almost no value to its artificial intelligence business.

After completing a record $86 billion IPO in mid-June, SpaceX’s stock has faced a turbulent trading performance. In the first three trading days after listing, SpaceX’s stock price rose nearly 50% at one point, but then continuously declined. On Thursday, the stock price hit a low of $110.85, down 18% from the IPO issue price, and closed at $115.07 on Friday.

Morgan Stanley analyst Adam Jonas wrote in a report to clients on Friday:

“We believe there is a clear disconnect between the increasingly pessimistic sentiment of investors and the company’s largely unchanged fundamentals. This creates an attractive buying opportunity for SpaceX stock.”

Jonas stated that many investors expect SpaceX’s stock price to fall further, and it could even drop to $100 after the first batch of lock-up shares is lifted next month. At that time, some insiders will be allowed to sell stock.

He believes that if the stock price reaches $100, investors are effectively pricing SpaceX’s AI business at zero, or even at a negative valuation. The analyst gives SpaceX a price target of $300, of which more than 50% of the valuation comes from the company’s AI business. Jonas wrote:

“Most investors we have spoken with have greatly underestimated the value of Grok and Cursor. Many believe the AI business is worth zero, or even a negative value, because compared to the space and connectivity businesses, the AI business requires huge capital input and its business model and profitability prospects are still highly uncertain.”

Investors Reduce Allocation to AI Sector, Analysts Still Bullish on SpaceX

As SpaceX’s stock price falls, investors are overall reducing their allocation to tech stocks, especially companies that have pledged to invest hundreds of billions of dollars in building AI models and related infrastructure.

The weak macroeconomic environment and rising tensions between the U.S. and Iran have pushed up oil prices, leading to concerns about inflation and dampening investors’ appetite for risk assets.

However, according to data compiled by Bloomberg, Wall Street analysts overall remain bullish on SpaceX’s stock. Of the analysts covering the company, nearly 80% have given it a “Buy” rating. The average analyst price target is about $232, indicating that SpaceX’s stock still has more than double the upside from current levels.

The other four major banks that underwrote SpaceX’s IPO—Goldman Sachs, Bank of America, Citigroup, and J.P. Morgan—have all given the stock equivalent of a “Buy” rating.

Morgan Stanley’s Jonas Is Long-Term Bullish on Tesla, Now Gives SpaceX a $300 Price Target

Among Wall Street analysts bullish on SpaceX, Morgan Stanley’s Jonas is among the most optimistic. His $300 price target ranks third highest among 33 analysts tracked by Bloomberg.

Jonas is no stranger to taking aggressive bullish positions. He is best known for being long-term bullish on Tesla and serving as an automotive industry analyst. Some of his previous attention-grabbing views on Tesla have repeatedly triggered major stock price swings. For example, two years ago he rated Tesla as one of the top picks in the U.S. auto industry, pushing the market to refocus on the stock.

Last year, Jonas left his position covering the automotive industry and turned to research in artificial intelligence and humanoid robots. He still maintains a bullish view on SpaceX and reiterated a “Buy” rating in his Friday report to clients. Jonas stated:

“SpaceX enjoys unique advantages in launches, connectivity services, and AI. We believe that the current valuation levels provide an attractive investment opportunity.”

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