Morgan Stanley says SpaceX investors miss the bigger story

SpaceX (SPCX) gave investors something of a spectacle on Friday.

Reuters reports that Starship's 13th test flight lifted off from Texas, released 20 Starlink V3 satellites, endured the reentry with its cleanest heat-shield performance yet, and completed an upright splashdown in the Indian Ocean.

According to The Washington Post, CEO Elon Musk talked about the data haul, arguing SpaceX got everything it needed from the heat-shield experiment "and then some," while engineer Kate Tice called it "lucky flight 13." The management's imagery and cheering made it seem like the mission was a clean sweep.

In reality, though, it wasn't

The satellites were temporary test articles on a suborbital path, burning up as planned instead of joining the Starlink network. Perhaps more importantly, five Super Heavy engines failed to relight during descent, which sent the booster into the Gulf of Mexico quicker than intended.

SpaceX spokesperson Dan Huot even said that SpaceX targeted a much softer return. The flight advanced upper-stage reentry, payload deployment, and communications testing, but problems with booster reliability and full reusability dampened much of the enthusiasm.

The mixed showing is unlikely to go much for the stock that's experienced a ton of headwinds of late.

Morgan Stanley's Adam Jones, though, feels the market is overlooking a critical part of SpaceX's future value amidst greater scrutiny on launch setbacks, capital spending, and near-term selling pressure.

Why Morgan Stanley say SpaceX's AI business is worth nothing at $100

Jones believes that the market is beginning to value SpaceX almost entirely as a launch-and-connectivity company, assigning little or no value to its AI assets as reported by Bloomberg.

According to Jones,

"Many ascribe zero or even negative value for AI given the high capex requirements relative to Space & Connectivity, largely uncertain economics, and the high degree of management time devoted to the business."

Consequently, he believes that the disconnect offers a far more attractive entry point with investor sentiment deteriorating sharply.

SpaceX shares approached $110.85 on the back of concerns of an upcoming insider lockup expiration, elevated AI spending, and macro uncertainty, along with a broader rotation away from high CapEx technology companies.

Yet Morgan Stanley feels the company's operating fundamentals remain "largely unchanged."