Why Oppenheimer Analysts Are Bullish on SpaceX, the 'East India Company of Space'

• Oppenheimer on Thursday initiated coverage of SpaceX with an "Outperform" rating and a price target 40% above its IPO price, citing its large potential market and technological advantages over competitors.

• Elon Musk's space exploration, satellite and artificial intelligence company is expected to debut on Friday in the largest IPO ever.

An early review of SpaceX stock is in, and it's glowing.

Oppenheimer on Thursday initiated coverage of SpaceX stock with an "Outperform" rating and a $190 price target. SpaceX shares are expected to begin trading tomorrow under the ticker "SPCX" at a $135 IPO price.

"We believe that SpaceX will use its expertise in engineering, manufacturing and space technologies to grow to the largest communications, cloud/AI company in the world," Oppenheimer analysts wrote in a note on Thursday. They expect the company's sizable technological lead in rocket and satellite technology, its vertical integration and its scale to help it grow revenue from $19 billion last year to more than $200 billion by 2030.

Why This Is Important

The size of SpaceX's impending IPO has made it one of the buzziest events on Wall Street in recent memory. How the market reacts to its debut, expected Friday, may set the tone for mega-IPOs from Anthropic and OpenAI that could come later this year.

They see SpaceX as a leader in three distinct lines of business -- Starlink and connectivity, launch and space services, and artificial intelligence -- that overlap such that each unit contributes to the others' success and lowers costs across the company. Today, Starlink is the cash cow. It grew revenue about 50% last year, accounting for more than half of total sales. Its healthy free cash flows are helping to fund the massive capital expenditures of the launch and AI businesses.

The launch business, and specifically its next-generation Starship, "is key to SpaceX's success," according to Oppenheimer. Starship is still in tests, but once operational it's expected to cut SpaceX's "cost-to-orbit" to about $100 per kilogram from about $2,700 today. Oppenheimer believes lower costs will enable SpaceX to expand its Starlink satellite constellation and make data centers in space economically viable, supporting its third business line -- AI.

SpaceX puts the potential value of its AI business at $26 trillion -- about 90% of its total addressable market -- but it has a long way to go. AI is the company's least mature business, with just over $3 billion in revenue last year. Its Grok model trails competitors from Alphabet, OpenAI and Anthropic in capabilities. AI is also its most expensive business, accounting for more than 60% of SpaceX's capital expenditures last year.