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SpaceX $100bn value explained

October 29, 2021

Equity analysts at investment bank Morgan Stanley have recently given Elon Musk’s SpaceX a valuation of some $100 billion. The bank has given a detailed breakdown of its analysis.

As with any financial forecast the bank gives three sets of metrics for its numbers: a ‘Bear’ (low) case, a ‘Base’ mid-point case and the (optimistic) ‘Bull’ case where the number-crunchers forecast a rising market for an economically sound product/business.

SpaceX, says the bank, on a ‘Bull’ case could have an equity value of more than $200 billion.

In July 2020 the bank published its ‘Space: Investing in the Final Frontier’ major report, saying: “We think of reusable rockets as an elevator to low Earth orbit (LEO),” according to the bank’s Equity Analyst Adam Jonas. “Just as further innovation in elevator construction was required before today’s skyscrapers could dot the skyline, so too will opportunities in space mature because of access and falling launch costs.”

Morgan Stanley estimates that satellite broadband will represent 50 percent of the projected growth of the global space economy by 2040—and as much as 70 percent in the most bullish scenario. Launching satellites that offer broadband Internet service will help to drive down the cost of data, just as demand for that data explodes.

SpaceX is a complicated business that is best split into three different divisions:

· The basic Falcon 9 launch segment

· Its advanced ‘Starship’ business

· SpaceX’s Starlink broadband division

Each of these segments needs its own suite of investments, although most observers see the Falcon 9 launcher as being cash-generative when supplying a launch for a commercial client. However, Morgan Stanley thinks that Starlink will “burn” through about $33 billion this decade and turn cash-flow positive in 2031.

The bank’s latest study now says that Musk’s giant Starship rocket will have wide-reaching implications. “This technological development has the potential to transform investor expectations around the space industry,” the bank says. In Morgan Stanley’s view, Musk’s company has created a “double flywheel” of technology with its reusable rockets and Starlink internet satellites.

Jonas goes further, saying that while SpaceX overall is a leader in rocket launches, Musk’s Starlink broadband service is its Golden Ticket. “We view SpaceX’s launch capabilities and Starlink as inextricably linked whereby improvements in launch capacity/bandwidth (both in frequency and payload per flight) and cost of launch improve the economics and path to scale of Starlink’s LEO constellation,” Jonas said. “At the same time, development of Starlink’s commercial opportunity provides a thriving ‘captive customer’ for the launch business, enabling a symbiotic development.”

“From our investor conversations, the sentiment on SpaceX has increased substantially along with the company’s valuation in the private market,” Jonas said.

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