SpaceX shares slipped on Thursday, extending losses for a second consecutive day as the company concludes its first week as a publicly traded entity following a record-breaking initial public offering.
Stock Performance and Volatility
The stock fell as much as 5.8% shortly after the opening of U.S. exchanges, adding to Wednesday's nearly 5% decline. This marked the first down day for shares after they surged 49% across the initial three days of trading. Despite the recent pullback, the rocket and artificial intelligence company remains on track to end the week approximately 35% above its IPO price of US$135.
Analyst Perspectives on Future Growth
Volatility is expected to persist as investors weigh lofty expectations for future revenue growth without a clear path to achieving them, according to Michael Monaghan, partner and portfolio manager at Founder Funds in Dallas, which holds shares of SpaceX.
“We got very comfortable owning this stock because we could see US$200 billion of revenue in 2030,” Monaghan said, noting even higher estimates elsewhere. “But literally and figuratively you need a rocket to go get those revenues.”
Andrew Beale of Arete Research initiated coverage on the stock with a buy rating and a US$401 price target, implying more than double the current trading price. “We think fundamentals and SpaceX’s long-term growth potential will drive investor interest,” Beale said. While he forecasts that the firm will top US$200 billion in revenue by 2030, he cautioned that the path there won’t necessarily be entirely smooth sailing.
“Space is hard and timelines can slip with launch anomalies, technical challenges, environmental concerns and any number of other factors, so all estimates should be treated with a wide degree of caution,” he added.
Potential Support from Index Inclusions
Despite the rocky few sessions of trading, shares may be about to get support from index inclusions in the weeks ahead. SpaceX will be eligible to be added to the Nasdaq 100 index after 15 days of trading, thanks to Nasdaq Inc. changing its rules to allow faster entry for megacap IPOs. FTSE Russell and MSCI Inc. made similar changes to allow early addition into their gauges.
As a result, about 30% of SpaceX’s free float is set to be owned by passive investors just two weeks after the IPO, according to Intropic, a provider of index-rebalancing forecasts. That demand, combined with its low float—as lockups keep insiders from selling shares for months—could put upward pressure on SpaceX shares.
