HSBC does not expect SpaceX's stock to rise. To value the stock, it had to abandon conventional methods.

HSBC believes that SpaceX shares are already fairly valued, even taking into account a significant “genius premium” for the company’s CEO, Elon Musk, who has repeatedly built businesses that have transformed entire industries. In the bank’s view, the current share price already reflects a significant portion of the company’s long-term growth potential.

HSBC analyst Nicolas Cot-Collisson has initiated coverage of SpaceX shares with a “Hold” rating and a price target of $115, according to CNBC and Barron’s. This is 2.7% below Thursday’s closing price and slightly above the stock’s current price. HSBC valued SpaceX using the sum-of-the-parts (SOTP) method: The bank separately calculated the value of the company’s key business segments and then added a twofold “innovation premium” to reflect Elon Musk’s ability to commercialize breakthrough technologies. Nevertheless, the resulting target price falls short of SpaceX’s IPO price of $135, HSBC notes.

“When valuing a company, analysts sometimes apply a discount—for example, due to a holding company structure, risks, or the fact that different businesses within the group may reduce overall efficiency. But we also consider the possibility of applying a premium, especially when a strong founder has already proven the ability to transform specific industries, including automobiles and rockets,” Kot-Collison wrote in a note to clients, as quoted by CNBC.

HSBC stated that it has moved away from traditional valuation methods in assigning a rating to SpaceX shares. According to the bank, the standard approaches used for conglomerates, SPACs, mining companies, or biotech firms do not adequately reflect the value that investors attribute to companies led by founders with a proven ability to transform entire industries.

Instead, analysts used Tesla’s stock performance during the first decade after its IPO as the best benchmark for calculating a fair “innovation premium.” In their view, the comparison is justified due to similarities in key factors: in both cases, the companies are led by Musk, feature breakthrough technologies, and take a similar approach to building new markets.

HSBC’s base-case scenario assumes that investors are already pricing in a significant portion of SpaceX’s long-term potential—including the further expansion of the Starlink satellite internet business, an increase in the number of rocket launches, and the development of its AI division.

In its most optimistic scenario, HSBC values SpaceX at $293 per share. It assumes that Starship will become commercially viable starting in 2027, and that launch capacity will double compared to the bank’s base-case scenario, Starlink will capture a larger addressable market with higher average revenue per user, and the company’s AI assets will command higher valuation multiples.

However, SpaceX has not yet been able to launch the 13th Starship test flight. A week ago, the attempt was aborted after several of the rocket’s engines failed to ignite, and the latest delay was due to weather conditions. Once again, the launch has been rescheduled for the evening of July 24. Starship is extremely important for SpaceX: it is expected to reduce the cost of putting a kilogram of cargo into orbit by 90% or more. Low costs open up opportunities for new business ventures, such as building AI data centers in space, according to Barron’s.

During Friday's trading session, SpaceX shares plummeted 4.7% to $112.8. This is more than 40% below the record closing price of $201.80 and 12% below the IPO price of $135. The stock is under pressure from the risk of further selling, as shares held by insiders and early investors will be unlocked on August 6, allowing them to sell. According to Bloomberg, this involves 911.5 million shares with a total value of up to $116 billion.

There are about 206 million shares of SpaceX held in short positions—that’s roughly 32% of the total number of shares in public circulation (free float), CNBC reported on July 21. Thus, “bear bets” against Elon Musk’s space company total about $25 billion, the network reported, citing estimates from S3 Partners.

SpaceX’s first earnings report on August 4 could also serve as a catalyst for its stock. SpaceX will need to demonstrate growth in its Starlink business to support its stock price, according to Barron’s.

"Hold" is an unexpected recommendation for SpaceX, notes Barron’s. Wall Street, on the whole, has a positive view of the company’s stock. At the start of trading on Friday, 28 out of 37 analysts—or 76%—who cover SpaceX had a “Buy” recommendation, the publication reports. For S&P 500 companies, the average percentage of “Buy” recommendations is typically 55–60%. Analysts’ average price target for SpaceX shares is about $237 per share, according to FactSet.

This article was AI-translated and verified by a human editor