The hype around SpaceX’s blockbuster IPO has been near-impossible to ignore.
The company set a fixed price of $135 per share, is targeting a record $75 billion raise on the Nasdaq under the ticker SPCX, and is scheduled to debut on June 12, making it the largest initial public offering in history, more than double Saudi Aramco’s 2019 record of $29 billion
But one of Wall Street’s most respected independent research firms just issued a warning that investors should not overlook. Morningstar initiated its first-ever coverage of SpaceX this week and arrived at a fair value estimate of $780 billion, roughly 55% below the company’s $1.75 trillion IPO target. The firm’s lead equity analyst, Nicolas Owens, didn’t soften the message: “We think the company has been significantly overvalued and investors will have opportunities to buy the stock at more attractive levels after the IPO,” CNBC reports.
Morningstar’s math: where the $780 billion comes from Owens built his valuation using a Discounted Cash Flow (DCF) model, a method that estimates a company’s value based on how much cash it is realistically expected to generate over time. A DCF model works backward from future projections, discounting them to reflect uncertainty; a higher uncertainty means a lower present value. He assigned SpaceX’s core launch business and Starlink satellite broadband unit a combined enterprise value of approximately $611 billion.