Piper Sandler Initiates SpaceX Coverage at Neutral, Cites Near-Term Headwinds

Piper Sandler initiated coverage of SpaceX with a Neutral rating and a $156 price target on Thursday, expressing caution on the aerospace firm's near-term stock performance despite what it called a "constructive multi-year view."

In a note to clients, analyst Alexander Potter outlined several factors underpinning the neutral stance, even while acknowledging the firm's comfort with SpaceX's long-term strategy after covering its sister company, Tesla, for over a decade.

Headwinds and Capital Demands

The primary reasons for the cautious rating are what Piper Sandler termed "idiosyncratic near-term headwinds." The firm highlighted two key concerns for investors in the coming months:

• Staged lockup expirations: The scheduled end of restrictions on selling shares could introduce new supply to the market, potentially capping upside.
• Tesla acquisition uncertainty: Lingering questions about a potential acquisition by Tesla create an overhang for the stock.

Furthermore, the firm noted that SpaceX's ambitious plans, including the development of orbital AI datacenters, will require immense investment. Capital expenditures are expected to "easily consume 10s (if not 100s) of billions of USD annually," according to the note. Piper Sandler believes it will take time for the market to become fully convinced of this strategy.

Long-Term View and Valuation

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Despite the near-term concerns, Piper Sandler views SpaceX and fellow rocket builder Rocket Lab as "probably best-positioned over a multi-year period." The firm attributed this to the significant competitive advantages derived from developing reusable rockets and the cost benefits of vertical integration.

The firm's $156 price target is based on a valuation of 20 times its estimated 2031 EV/EBITDA, discounted back to the present at a rate of 15%.

Broader Sector Ratings

Piper Sandler's note also launched coverage on other space-sector companies. Rocket Lab (RKLB) also received a Neutral rating with an $83 price target, with the firm noting it is "hard to argue that SPCX and RKLB are 'cheap'" over a one-year horizon.

In contrast, the firm initiated AST SpaceMobile (ASTS) with an Overweight rating and a $100 price target. Piper Sandler expressed a preference for ASTS in the near term, citing its "more palatable valuation and clearer path to EBITDA upside."