JPMorgan boosts SpaceX price target to $500, outlines Tesla merger scenario

The bank's assessment strengthens the market's view of SpaceX as an AI infrastructure firm rather than a rocket-and-satellite operator. This increases the pressure on the company to develop computing capacity and secure funding. For Tesla investors, the 30% to 35% premium framework offers a tangible benchmark for merger talk and could support the stock while committees deliberate. China is the primary risk, due to Tesla's presence there and SpaceX's defense connections. Any deal that separates or isolates that segment would raise its own valuation issues. The heavy capital requirements JPMorgan highlights also contribute to the broader discussion on AI financing, while SpaceX has stated it is not pursuing an equity offering.

Coverage from the previous day:

• SpaceX exceeded third-quarter projections in all three divisions, with AI revenue surpassing $7.5 billion

JPMorgan currently assesses SpaceX more as an AI leader than a launch firm, and has outlined potential terms for Tesla investors should Musk unite his two largest entities.

• JPMorgan increased its SpaceX price objective to $500 from $240 and maintained an Overweight rating following the firm's third-quarter performance.
• The bank more than doubled its projections for 2027 and 2028, citing superintelligence as the primary growth catalyst.
• It projects 2027 revenue of approximately $254 billion, and derives its target from 20 times its estimated 2028 earnings per share of about $24.
• JPMorgan highlighted execution risks concerning expanding compute capacity, securing capital, and maintaining demand; SpaceX informed the bank it is not contemplating an equity offering.
• It views a potential Tesla merger as a probable SpaceX-led all-share transaction at a 30% to 35% premium over Tesla's stock price, with Musk retaining more than 50% voting power.
• China constitutes the main regulatory obstacle, and JPMorgan preserved its Neutral rating and $415 target on Tesla.

JPMorgan has more than doubled its SpaceX price target to $500 from $240, while retaining an Overweight rating following the company's third-quarter outcomes. The bank contends that AI, not its rocket operations, is now the primary growth engine for the firm.

Analyst Doug Anmuth stated that SpaceX surpassed sales forecasts in all three business segments, and he singled out superintelligence as the key growth driver. JPMorgan more than doubled its projections for 2027 and 2028 and currently anticipates 2027 revenue of roughly $254 billion. It predicts annual recurring revenue of approximately $400 billion by end-2027, falling short of management's own guidance of $500 billion to $1 trillion. The revised target rests on 20 times JPMorgan's estimated 2028 earnings per share of around $24.

JPMorgan warned that achieving those projections demands substantial execution, such as expanding compute capacity, raising significant funds, and maintaining robust demand. SpaceX anticipates having 2 to 3 gigawatts of compute capacity by end-2026 and intends to add 10 gigawatts in 2027. It informed the bank that it is not contemplating an equity raise.

The report also covers a possible tie-up with Tesla, following Elon Musk's statement on SpaceX's earnings call that both firms had established special committees to explore a merger. JPMorgan views the most probable scenario as a SpaceX-led, all-share transaction at a 30% to 35% premium over Tesla's stock price. It would be set up as a merger of equals that preserves Musk's voting power above 50%. The bank called the strategic rationale sensible, citing common engineering expertise, AI infrastructure, the Terafab chip plant in Texas, and Musk's direction.

JPMorgan says shareholder and regulatory clearance are the main barriers, with China posing a specific difficulty due to SpaceX's links to the US government and defense industry. Potential remedies include isolating Tesla's China business or handing its control to a consortium based in China. In such a setup, Tesla could still generate income through licensing its brand and Full Self-Driving technology.

JPMorgan maintained its Neutral rating and $415 target on Tesla. SpaceX posted third-quarter revenue of roughly $14.6 billion, a 161% increase year over year, and adjusted EBITDA climbed approximately 306% to around $8.8 billion, both exceeding analyst expectations.