SpaceX shares are under pressure from the upcoming lockup expiry, but Morgan Stanley believes this creates a mispriced buying opportunity.

On Monday, SpaceX shares briefly dipped to $108.66, a new all-time low, representing a decline of over 50% from the high of $225.64. With the lockup period ending, some investors expect the stock could fall further to $100.

According to a report from Morgan Stanley analyst Adam Jonas, if the stock price does drop to $100, it would imply the market is valuing SpaceX's AI business at zero or even negative. Furthermore, the implied expectation for the Rocket Launch and Starlink business's 2028 EBITDA would be roughly 30% below the firm's base case forecast.

The firm maintains an Overweight rating on SpaceX with a price target of $300. Morgan Stanley believes the current divergence between bearish sentiment and fundamentals creates an attractive entry point. At prices below $120, investors are essentially getting the option value of the company's entire AI business for free, as the core Rocket Launch and Starlink operations alone already cover the current stock price.

A Divergence Between Market Sentiment and Fundamentals

While there have been no major changes to SpaceX's fundamentals in recent weeks, bearish conviction has strengthened, while bulls are increasingly waiting for clearer catalysts.

From investor conversations, the core disagreement revolves around the pricing of the AI business. Most investors are heavily discounting, or even completely ignoring, the value of Grok and Cursor, believing that AI monetization opportunities are primarily concentrated in the neocloud space.

Reasons cited include: the high capital expenditure for the AI business relative to Rocket Launch and Starlink, significant uncertainty in economic models, and the amount of management attention being devoted to the AI segment.

Some investors even assign a negative value to the AI business, fearing that high capital spending will erode overall value. Morgan Stanley disagrees with this view, arguing that this pricing approach is too conservative and overlooks multiple potential paths for AI monetization.

What $100 Means

Based on the firm's 2028 base case forecast—revenue of $157 billion (including an average of 6 GW of compute capacity at $16.5 per watt, and 35 million average consumer users at $46 monthly ARPU) and EBIT of approximately $69 billion—a stock price of $100 would imply a FY28 EV/EBIT of 18x for SpaceX. This is roughly in line with the median of comparable companies, but its revenue compound annual growth rate (CAGR) for 2025-2030 is 76%, approximately three times the median of 26% for its peers.

From a cross-sectional perspective, an 18x EV/EBIT would rank around the 81st percentile in the S&P 500 (excluding financials and real estate), placing it in the same range as Boeing (21x), Waste Management (19x), CSX (18x), and Garmin (18x).

Breaking down the business further, if the Rocket Launch and Starlink business is valued at 40x EV/EBITDA (slightly below the median of 46x for space comparables), the implied value of the AI business would be exactly zero. If a slightly above-median multiple of 50x is used, the AI business would have an implied negative value of $300 billion. Morgan Stanley believes both scenarios are unreasonable.

Core Business Already Supports the Current Stock Price

Even if the AI value is completely excluded, SpaceX's Rocket Launch and Starlink operations alone are sufficient to support the current stock price.

The firm's 15-year DCF model values the Rocket Launch and Starlink business alone at approximately $136 per share, using an EV/EBITDA multiple of 56x. At a hypothetical price of $100, this implies the market is pricing this business at an implied 2028 EBITDA roughly 28% below Morgan Stanley's base case, while assigning zero value to AI.

Currently, SpaceX holds over three-quarters of the global market share for mass-to-orbit and maneuverable satellites in orbit. Its connectivity business is growing at nearly 50% this year, with an EBITDA margin of 40%. Buying SpaceX at current valuations means acquiring a dominant, high-growth space and connectivity business at a discount, with all AI option value essentially thrown in for free.

From a sum-of-the-parts valuation, Morgan Stanley's base case target of $300 is composed of: Space business $8, Connectivity business $128, X and Grok business $12, and Enterprise AI business $152.

Recent Positive Catalysts

On the launch front, Starship's 14th and 15th test flights are expected in September and October, respectively. These could include the first catch of the V3 Starship booster, the first orbital flight (with deployment of operational V3 satellites), and the first catch of the Starship upper stage.

On the AI side, Grok 4.6 (a 2 trillion parameter model) is expected to be released within the next month, with Grok 5.0 (a 6 trillion parameter model) slated for later this year. The Cursor acquisition is expected to close by the end of the third quarter, at which point substantial updates on Cursor's annual recurring revenue (ARR) and Grok platform adoption rates are anticipated.

On the compute expansion front, SpaceX is expected to double its compute capacity from current levels to 2 GW by year-end, which could lead to more large neocloud contracts.

Given that the market is currently assigning almost no value to AI, any positive development in these areas could act as a trigger for a stock price recovery.

Key Risks Cannot Be Overlooked

In the near term, the stock faces dual pressures: the upcoming lockup expiry will bring additional supply pressure, and the upcoming earnings release may not answer the questions investors care about most.

A bear case scenario (price target of $75) assumes: Starship progress stalls, compressing the narrative; AI monetization is significantly slower than expected; the Rocket Launch and Starlink business comprises over 90% of total valuation; and Starship operations are delayed to 2029.

Other key downside risks include: slowing Starlink user growth, persistently high cost per watt for AI infrastructure, lengthening AI build cycles, equity dilution from increased financing needs, and regulatory uncertainty.

A bull case scenario (price target of $600) assumes a full acceleration of Starship, orbital compute, and Terafab, with AI accounting for over 60% of total valuation and compute capacity growing at a 46% CAGR.