Retail has really been crowding the SpaceX trade in these earlier days, and where there’s been no shortage of twists and turns for those hyper-volatile shares of Space Exploration & Technologies (NASDAQ:SPCX | SPCX Price Prediction), I do think that investors must, at the very least, attempt to gauge the ambitious narrative to determine if today’s prices (less than $10 above the IPO price of $135 per share) are, in fact, a decent, or, at the very least, a fair deal.
Of course, you’ve probably heard about how outrageously expensive the shares are. But, at the same time, the hyper-growth story is equally explosive. However, whether or not that’s enough to justify today’s sticker price remains the big topic of debate on Wall Street.
What’s the fair price to pay for SpaceX?
As analyst projections and price targets are coming in from all over the place, from a high of $800.00 to as low as the double digits (really, who can blame them, since a lot of SpaceX stock’s value comes from some pretty out-there growth drivers that might be a profound success, or they might fall flat). Before you subscribe to the bull camp or the bear camp (Morningstar’s sober price target of $62.00 entails a more than halving the shares if they’re to hit its estimate of fair value), I do think it’s worth hearing out the bear and bull camp theses and targets.
If you’re not a hyper-growth investor and are more inclined to go for classical, easy-to-predict firms with steady cash flows, you’re probably going to find shares of SpaceX will be wildly expensive, perhaps close to the most expensive stock on the market.
But if you’re a believer in Elon Musk and think the man will stop at nothing to win the AI race and the corporate space race, perhaps there are ways to justify that seemingly hefty multiple. Even if it’s still hard to gauge what an appropriate price is to pay for one of the biggest new mega-cap tech titans to land in recent memory (actually, of all time), perhaps it’s worth checking in to see what the top hedge funds are doing with the name.
The smart money has been buying (more like nibbling)
Surprisingly, the smart money crowd has not been waiting around to punch their ticket to Elon Musk’s $1.89 trillion space and AI titan. Whether that gives you the confidence and green light to punch your ticket, though, remains the big question.
With big names, including the great David Tepper, Daniel Loeb, and Chase Coleman, all doing some buying last quarter, you’d be in some pretty good company by buying in at these levels. Indeed, nobody wants to get left behind once Elon Musk’s firm finally does blast off. But at the same time, there’s a lot of work to do, and I’m not so sure SpaceX can soothe investors with the hefty CapEx, which I think can only move higher from here.
Whenever a heavyweight champ like David Tepper picks up some shares, it only makes sense to follow suit. But, at the same time, investors should be cautious since the hedge fund buying has been relatively tame. When it comes to the overall portfolios, second-quarter buying activity has barely moved the needle, with new positions accounting for far less than 1% of overall portfolios.
In my view, that screams nibbling a bit today is the move as one looks to add more on weakness, which might not be all too far off. Given the recent pressure on shares, it will be interesting to learn whether or not hedge funds added to the dip that took shares several dollars below the IPO price.
Whether you look at analyst price targets, institutional buying activity, the retail frenzy, or Dr. Michael Burry’s reluctance to short the stock, it’s going to be hard to stay sidelined if there’s another shot to buy at the IPO price in this second half.
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