Morgan Stanley, the New York-based investment bank, has nearly doubled its valuation of Elon Musk’s rocket company SpaceX from $ 52 billion in July to over $ 100 billion, according to a research note released Thursday. The so-called “bull case” of the bank – the absolute best-case scenario – brings SpaceX to a value of over 200 billion US dollars.
The research report entitled SpaceX: Increase of the evaluation scenarios after important developmentscited the company’s recent $ 1.9 billion funding round and “continued momentum in government wins” (mainly from NASA and the US Department of Defense) as the main drivers behind the SpaceX value revision. The note doesn’t mention important financial details like SpaceX’s current earnings or estimated earnings for 2020 or even 2021. Or whether or not SpaceX is profitable.
Morgan Stanley describes Musk’s space business as “mission control” for the “emerging space economy”. With his launch capabilities (transporting satellites, people or instruments into space for customers), Starlink (developing the Internet from satellites), and Earth to Earth (often referred to as point-to-point travel), Morgan Stanley says, “The Parts come together for SpaceX to create an economical and technological flywheel. “But it will take hundreds of billions of dollars more investment to do that.
The biggest driver behind the massive rating upgrade is Starlink, SpaceX’s “constellation” of tiny satellites designed to broadcast broadband Internet worldwide (and into new markets) from space. While Morgan Stanley estimates SpaceX’s startup business at $ 12 billion and unproven point-to-point space travel at $ 9 billion, the bank has estimated Starlink’s (also not yet proven) worth of $ 42 billion Raised to $ 81 billion. based on a revised estimate of potential subscribers from 235 million to 364 million worldwide by 2040.
However, to reach that number, it will cost about $ 240 billion to build the network, says Morgan Stanley. This is one reason why there are many people who are skeptical that Starlink will work as advertised, particularly investment bank Cowan, which issued a research note in late September that questioned the value of Starlink for “bandwidth-driven” homes in the US.
Investors rated SpaceX just in August when the company raised $ 1.9 billion in funding – valued at $ 46 billion. Forbes uses this number to rate Musk’s stake in SpaceX, minus a 10% discount, as it is a privately held, illiquid asset.
Such wild valuation differences are possible because it is nearly impossible to define SpaceX alongside a number of publicly listed comparable companies. Unlike Tesla, Musk’s other major company, the company’s shares are not publicly traded, and there are no direct, publicly traded competitors.
Large financial institutions that may wish to position themselves as potential partners in an upcoming IPO may have an incentive to overvaluate companies. A statement on Morgan Stanley’s SpaceX report said, “Morgan Stanley does business with companies under Morgan Stanley Research.
Chad Anderson, managing partner of New York-based venture capital firm Space Angels, is also optimistic about SpaceX’s value. Citing UBS research, he says that if SpaceX’s point-to-point travel business takes the aviation industry’s market share, there will be an “opportunity” of $ 10 billion to $ 20 billion annually for whoever gets there first results.
Musk himself claimed in a 2017 tweet that his proposed Starship rocket could fly from New York to Shanghai in less than 40 minutes, opening the world to a new age of far-traveling, high-paying business customers.
Given that Starlink is said to be connecting parts of the world without broadband internet connectivity yet, Anderson reported that Starlink’s expected future revenues are between $ 30 billion and $ 50 billion per year (Musk claimed this in 2019, according to Morgan Stanley), even a conservative valuation multiple would bring this line of business alone to $ 90 billion. “And that doesn’t even count Mars and the space stuff,” which both Anderson’s Space Capital and Morgan Stanley don’t appreciate. “It is almost impossible to give precise information about the possibilities.”
From here, landing on Mars is a long way with many potential hurdles. As a private company, SpaceX does not publish its earnings. In 2018, the company had sales of around $ 2 billion, according to an estimate by investment bank Jefferies.
In order for SpaceX to accomplish everything that Morgan Stanley broadly outlines, avid investors still have to pour huge sums of money into Musk’s rocket company.
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