KeyBanc Issues Cautious Outlook on SpaceX, Warning of Potential Valuation Correction

KeyBanc Capital Markets has initiated coverage of SpaceX with a “Sector Weight” rating—effectively a hold recommendation—suggesting that the company’s current valuation may already account for much of its future growth. While the investment bank acknowledged the company’s disruptive potential, it declined to issue a specific price target, noting that the current risk-reward profile appears balanced.

Despite SpaceX shares trading approximately 27% above their $135 IPO price, the stock has retreated more than 20% from its peak, resulting in a market capitalization of roughly $2.2 trillion, including debt. However, KeyBanc’s internal valuation suggests a significantly lower figure.

Using a discounted cash flow model based on Starlink and other connectivity services, KeyBanc estimated SpaceX’s enterprise value at approximately $1.02 trillion in a base-case scenario. This valuation is less than half of the current market value, indicating that investors may be overly optimistic about the company’s trajectory.

A primary driver of this caution is the development of Starship. Although CEO Elon Musk views the reusable rocket as essential for satellite deployment and deep-space exploration, KeyBanc pointed out that the program is still maturing and has faced several setbacks that have delayed timelines. The bank stated that while Starship is expected to eventually succeed, a conservative approach is necessary until there is greater visibility into its progress.

Additionally, KeyBanc highlighted near-term liquidity risks. Since SpaceX went public with only 5% of its 13 billion shares available for trading, it possesses one of the smallest floats among mega-cap stocks. The bank warned that as the lockup schedule expires and insider shares are released into the market, the resulting increase in supply could create significant liquidity uncertainty.

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