Starship may reshape the space economy! Pivotal first gives SpaceX (SPCX.US) a "buy" rating with a target price of $220.

Pivotal Research Group initiated coverage of SpaceX (SPCX.US) on Tuesday with a buy rating and set a target price of $220 by the end of 2027. Based on SpaceX's closing price of $147.95 on September 4, this target implies about a 49% upside. Pivotal believes that whether SpaceX's future valuation can unlock further potential hinges on whether Starship can truly achieve low-cost, high-frequency reuse; once this technology is validated, the cost structures of satellite communications, commercial launches, and even space AI infrastructure could be fundamentally altered. The firm's chief analyst, Jeffrey Wlodarczak, stated that the core assumption of their investment logic is that SpaceX can demonstrate that each Starship can be quickly reused with low refurbishing costs, completing 20 to 50 flights. Pivotal estimates that if Starship successfully achieves this level of reuse, SpaceX's launch costs could decrease by more than 90%. The drastically reduced transportation costs not only could help the company expand the Starlink satellite network at a lower cost but may also enable businesses such as orbital data centers, which are currently not economically viable under existing launch costs, to become reality. Under this hypothesis, Pivotal has provided quite aggressive predictions for SpaceX's future growth. The agency expects SpaceX's annual revenue to increase from $46.6 billion in 2026 to $118.2 billion in 2027; adjusted EBITDA is projected to grow from $11.2 billion in 2026 to $22.3 billion in 2027, nearly doubling. As Starship gradually takes on more launch tasks, Pivotal predicts that launches supported by Starship will increase from about 110 in 2027 to over 3,200 by 2035. Meanwhile, the total cargo launched by SpaceX is expected to rise from 2,360 tons in 2026 to over 500,000 tons by 2035. As economies of scale begin to manifest, the launch revenue per ton is anticipated to decline significantly from $7.5 million to approximately $600,000. Lower launch costs will also provide greater opportunities for Starlink expansion. Pivotal estimates that by 2037, the number of customers for Starlink's self-service connection service could reach 170 million. At the same time, as SpaceX expands its user base by lowering prices, the average monthly revenue per user is expected to decline from $74 in 2026 to about $40 by 2035. Analysts believe that in the longer term, the scale of enterprise and government connectivity business may even surpass that of consumer subscription services. Notably, this forecast does not assume that SpaceX achieves a significant share in the mobile communications market nor does it consider the company deploying close to its potential planned scale of 100,000 satellites, indicating that Pivotal's Starlink forecast does not fully account for these potential growth opportunities. Aside from satellite communications, AI infrastructure has become another core pillar for Pivotal's high valuation of SpaceX. Pivotal predicts that SpaceX's computing capacity may grow from 2.2 gigawatts in 2026 to 110 gigawatts in 2035, with approximately 80% of this computing capacity operating in space. The agency believes that by lowering launch costs, adopting new data center designs, and improving manufacturing efficiency through the proposed Terafab semiconductor complex, SpaceX is expected to reduce the capital expenditure required for each gigawatt of AI computing capacity by about 75%. This means that if Starship can significantly lower transportation costs for accessing space, SpaceX may not only remain a rocket and satellite internet company but could gradually become an important player in AI computing infrastructure. However, achieving such a massive business blueprint requires substantial funding support. Pivotal estimates that SpaceX may need to raise about $1 trillion in funding over the next decade, including a potential need for $75 billion in the second half of 2027 alone, followed by annual funding needs of around $125 billion up to 2032. Customer prepayments, debt financing, and stock issuances could serve as channels for SpaceX to raise funds, but Pivotal also cautions that if the company needs to issue a large number of new shares during a downturn in stock prices, it could pose a significant dilution risk to existing shareholders. In terms of valuation, Pivotal's target price of $220 is based on a discounted cash flow model, using a discount rate of 13%, and valuing SpaceX at 16 times the expected adjusted EBITDA for 2037. The agency assigns a 65% probability to the base case scenario, corresponding to the target price of $220; a pessimistic scenario probability of 20%, corresponding to $75 per share; and an optimistic scenario probability of 15%, corresponding to $420 per share. Nevertheless, Pivotal emphasizes that SpaceX remains a high-risk, long-cycle investment. A significant portion of the current valuation is derived from cash flows that may not materialize for more than a decade, so any delays in Starship's R&D and commercialization, costs exceeding expectations, or financing difficulties could have a significant impact on the company's valuation. In the short term, investors can focus on the subsequent test flights of Starship, continued growth in Starlink users, new contracts acquired by SpaceX's ground AI computing business, and technological advancements related to SpaceX or Tesla, Inc. (TSLA.US). Major risks include delays in Starship progress, long-term negative free cash flow, high dependence on Elon Musk, industry competition, regulatory scrutiny, and potential additional selling pressure that may arise as shareholder lock-up periods begin to expire before an IPO.