One Wall Street Analyst Sees 50% Upside in SpaceX. Why I'm Still Not Buying the Stock.

Wall Street analysts are already offering their opinions on Space Exploration Technologies(NASDAQ: SPCX), with one firm forecasting 50% upside. Oppenheimer analyst Tim Horan, who already had a buy rating on SpaceX before its IPO, recently upped his price target from $190 to $250.

Horan praised the company's vertical integration, saying it can disrupt a lot of different industries. One of those businesses is the wireless industry, with the analyst noting that the mobile market for Starlink could eventually become bigger than its satellite internet offering. He's bullish on that business as well, believing it could increase its capacity to serve hundreds of millions of customers.

He noted that if Elon Musk's prediction of $1 trillion in revenue by 2030 is anywhere close, SpaceX could be a $10 trillion company. Horan did say that Musk's Terafab chip foundry and Starship rocket are ambitious projects that carry risk, but that SpaceX and Musk are great at these very ambitious projects.

Image source: The Motley Fool.

Taking the under on SpaceX

While Oppenheimer is bullish on SpaceX, I put myself firmly in the skeptical camp. I'd classify Musk's track record of delivering big projects as much more spotty than great, and there is plenty of evidence to back that up. In fact, The New York Times analyzed 600 of his claims over the past 15 years, and only 19% were completed on time, and his annual rate of success has been on the decline.

While Starlink is a nice business, it's also a capital-intensive business, and not one worth anywhere close to $1 trillion in my view. It also isn't likely to disrupt the mobile market, given the current infrastructure and spectrum in place, better indoor coverage, lower costs, and greater capacity in cities and suburbs. Instead, it could be a nice complement in rural areas, airplanes, cruise ships, and some enterprise applications.

Building a huge foundry to compete with Taiwan Semiconductor Manufacturing also seems like a long-shot bet. TSMC is a virtual monopoly for a reason, and even Nvidia's CEO said the project is "almost impossible." Meanwhile, data centers in space face several challenges, including developing cooling systems that work in space, designing chips that withstand cosmic radiation, and creating robots to build and assemble a data center in orbit.

At the end of the day, SpaceX generated less than $19 billion in revenue last year, but has a market cap of around $2 trillion. Its valuation is just based on a bunch of what-ifs from a CEO with a spotty track record. I'm taking the under and don't think SpaceX will come remotely close to hitting $1 trillion in revenue in the next few years.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Taiwan Semiconductor Manufacturing, and The New York Times Co. The Motley Fool has a disclosure policy.