(Bloomberg) — The decline in SpaceX stock is pushing the stock near levels that suggest investors aren’t assigning any value to the company’s artificial intelligence business, Morgan Stanley analysts said.
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The rocket, space and artificial intelligence company made a shaky trading debut after making a record $86 billion offer in mid-June. The stock initially rose nearly 50% in the first three sessions, but has since fallen. It hit a low of $110.85 earlier this week, 18% below its IPO price.
“We believe the current disconnect between increasingly bearish investor sentiment and little changed fundamentals creates an attractive entry point for SpaceX stock,” Morgan Stanley analyst Adam Jonas wrote in a note to clients on Friday.
Jonas said many investors expect SpaceX’s stock price to fall further, reaching $100 a share next month when the lockup on the first batch of shares is lifted and some insider selling becomes possible. At that level, he argues, investors are pricing in zero or even negative value for the company’s AI division.
The analyst has a $300 price target for SpaceX stock, with more than 50% of that being allocated to the company’s AI division.
“Most investors we spoke to are pricing Grok & Cursor at a deep discount,” Jonas wrote. “Many believe AI has zero or even negative value, given the high capital investment requirements associated with space and connectivity, largely uncertain economic conditions, and the high degree of administrative time spent on businesses.”
SpaceX’s decline comes as investors broadly walk away from the technology company, which has pledged to spend hundreds of billions of dollars on AI and the infrastructure needed to support it. A volatile macroeconomic backdrop and rising tensions between the US and Iran have pushed up oil prices, heightened inflation concerns and deteriorated sentiment towards risk assets.
Still, Wall Street is overwhelmingly bullish on SpaceX stock, with nearly 80% of analysts covering the company recommending the stock be a buy, according to data compiled by Bloomberg. The average price target of around $232 means the stock is more than double what it’s currently trading at.
Analysts at Goldman Sachs Group, Bank of America, Citigroup, and JPMorgan Chase & Co. (the other four banks that led the SpaceX offering along with Morgan Stanley) have all issued buy-equivalent ratings on the stock.
