Starship or reinvent the space economy! Pivotal gives SpaceX (SPCX.US) an initial “buy” rating target price of $220

The Zhitong Finance App learned that Pivotal Research Group covered SpaceX (SPCX.US) for the first time on Tuesday, gave it a “buy” rating, and gave a target price of $220 at the end of 2027. Based on SpaceX's closing price of $147.95 on September 4, this price target represents about 49% room for growth. Pivotal believes that the key to whether SpaceX's future valuation can be further opened up is whether Starship can actually achieve low-cost, high-frequency reuse; once this technology is verified, the cost structure of satellite communications, commercial launches, and even space AI infrastructure may be completely changed.

Jeffrey Wlodarczak, the bank's chief analyst, said that the core assumption of its investment logic is that SpaceX can prove that each Starship can be quickly put back into use after a low-cost refurbishment and complete 20 to 50 flights.

Pivotal predicts that if Starship successfully achieves this level of reuse, SpaceX's launch costs can be reduced by more than 90%. The sharp drop in transportation costs will not only help companies expand the Starlink satellite network at a lower cost, but may also make businesses such as orbital data centers that are not economically viable under existing launch costs a reality.

Under this assumption, Pivotal gave quite aggressive predictions about SpaceX's future growth. The agency predicts that SpaceX's annual revenue will increase from US$46.6 billion in 2026 to US$118.2 billion in 2027; adjusted EBITDA is expected to nearly double from US$11.2 billion in 2026 to US$22.3 billion in 2027.

As Starship gradually undertakes more launch missions, Pivotal anticipates that the number of launches supported by Starship will increase from about 110 in 2027 to more than 3,200 in 2035.

Meanwhile, the total amount of goods SpaceX has put into orbit is expected to grow from 2,360 tons in 2026 to more than 500,000 tons in 2035. As the scale effect gradually becomes apparent, the customer's launch revenue per ton of cargo is expected to drop sharply from $7.5 million to around $600,000.

Lower launch costs will also provide more room for Starlink to expand. Pivotal predicts that by 2037, the number of Starlink self-service connectivity service customers may reach 170 million. Meanwhile, as SpaceX expands its user base through lower prices, the average monthly user revenue is expected to drop from $74 in 2026 to around $40 in 2035.

Analysts believe that in the longer term, the scale of enterprise and government connectivity businesses may even exceed consumer subscription businesses. Notably, this forecast did not assume SpaceX's huge share of the mobile communications market, nor did it assume that the company would eventually deploy 100,000 satellites close to its potential planned size, which meant that Pivotal's Starlink forecast did not fully account for these potential growth opportunities.

In addition to satellite communications, AI infrastructure has become another core pillar that Pivotal has overvalued SpaceX. Pivotal predicts that SpaceX's computing power may grow from 2.2 gigawatts in 2026 to 110 gigawatts in 2035, of which approximately 80% of the computing power will eventually run in space. The agency believes that by reducing launch costs, adopting a new data center design, and improving manufacturing efficiency brought about by the proposed Terafab semiconductor complex, SpaceX is expected to reduce the capital expenditure required per gigawatt of AI computing power by about 75%.

This means that if Starship actually drastically reduces transportation costs into space, SpaceX may not only be a rocket and satellite internet company in the future, but may also gradually become an important participant in AI computing power infrastructure.

However, implementing such a large commercial blueprint requires huge financial support. Pivotal estimates that SpaceX may need to raise about $1 trillion over the next ten years, of which $75 billion may be needed in the second half of 2027 alone, and then until 2032, the annual capital requirement may reach about $125 billion. Customer prepayments, debt financing, and stock issuance may all be channels for SpaceX to raise capital, but Pivotal also warned that if the company needs to issue a large number of new shares during a period of low stock prices, it will pose a clear risk of equity dilution to existing shareholders.

Judging from the valuation, the target price of $220 given by Pivotal is based on a cash flow discount model, using a 13% discount rate, and is valued according to SpaceX's estimate of 16 times the adjusted EBITDA in 2037. The agency assigns a 65% probability for the basic scenario, corresponding to a target price of $220; the probability for the pessimistic scenario is 20%, corresponding to $75 per share; and the probability for the optimistic scenario is 15%, corresponding to $420 per share.

However, Pivotal also emphasized that SpaceX is still a high-risk, long-term investment. A significant portion of the current valuation comes from cash flow that may only be generated more than a decade later, so any delays in Starship's R&D and commercialization, cost exceeding expectations, or financing difficulties may have a significant impact on the company's valuation.

In the short term, investors can pay attention to Starship's subsequent test flights, the continued growth of Starlink users, new contracts obtained by SpaceX's ground-based AI computing business, and developments in SpaceX or Tesla (TSLA.US) related technology.

The main risks include delays in Starship's schedule, long-term negative free cash flow, high dependency on Musk, industry competition, regulatory scrutiny, and additional selling pressure that may occur after the pre-IPO shareholder sales restrictions end one after another.