SpaceX is set to release its first financial report as a publicly traded company, with its stock having fallen sharply from recent highs. However, major Wall Street institutions continue to support the company's long-term narrative.

According to trading desk reports, Deutsche Bank released an updated report ahead of the earnings announcement, maintaining a "Buy" rating and a $255 price target on SpaceX. The report indicates that recent share price pressure stems primarily from expectations of IPO lock-up expirations, uncertainty surrounding the AI business outlook, the complexity of a potential Tesla merger, and lower-than-expected passive index buying. As of August 3, SpaceX shares were trading at $115, nearly halved from their 52-week high of $201.80.

Through a Sum-of-the-Parts (SOTP) stress test, Deutsche Bank noted that at the current market capitalization of approximately $1.4 trillion, the space and connectivity businesses could already account for the entire share price. This implies that the market is assigning a near-zero valuation to the AI business, which Deutsche Bank considers "overly punitive."

Meanwhile, JPMorgan previously initiated coverage with an "Overweight" rating and a $225 price target. The bank forecasts that SpaceX's revenue will grow at a compound annual growth rate of 91% between 2025 and 2030, expanding from $19 billion to $470 billion.

Second-Quarter Earnings Expectations: AI Business to Be the Main Growth Driver

Deutsche Bank estimates SpaceX's second-quarter revenue at $6.671 billion, representing a 64% year-over-year increase. The gross margin is projected at approximately 58%, with adjusted EBITDA exceeding $2.1 billion.

The AI segment is the most significant source of incremental growth this quarter. Deutsche Bank expects AI revenue to more than double sequentially to $1.876 billion, driven primarily by partial-quarter contributions from a new cloud services agreement with Anthropic. In comparison, the broader market consensus for AI segment revenue is approximately $2.084 billion.

The connectivity business also continues to show strong momentum. Deutsche Bank forecasts broadband subscriber numbers to reach 12.5 million by the end of the quarter (up from 10.3 million in the first quarter). Average revenue per user (ARPU) is expected to decline slightly by $3 quarter-over-quarter to $63, driving connectivity revenue to grow more than 50% year-over-year, approaching $4 billion.

In the space segment, the second quarter saw nine external Falcon 9 commercial launches, up from seven in the first quarter but down from 11 in the same period last year. Regarding capital expenditure, Deutsche Bank estimates it at approximately $17 billion, primarily for AI computing power expansion, which would increase capacity to between 1.3 and 1.4 gigawatts. The report also anticipates a free cash flow net burn of over $10 billion.

Key Focus Areas for the Earnings Call: Launch Cadence, Mobile Network, and AI Progress

Deutsche Bank has outlined four main areas of focus for investors on the earnings conference call.

Regarding launch and Starship progress: Following the success of the 13th Starship test flight, the market will focus on the timeline for subsequent launches, particularly whether a tower catch of the second stage can be achieved.

For the connectivity business: Beyond subscriber numbers and ARPU trends, management's latest update on the roadmap for a U.S. terrestrial mobile network is highly anticipated. Key questions include whether the company will choose to build its own network, operate as a mobile virtual network operator (MVNO), or pursue an acquisition.

In the AI business: There are several variables, including the accelerated iteration of the Grok model and the competitive pressure it faces from open-source alternatives, the integration of the Cursor acquisition, and new cloud service developments. Google reportedly views SpaceX's computing capacity only as a transitional bridge during constrained periods, while the U.S. government is reportedly in talks regarding a cooperation agreement. Deutsche Bank expects SpaceX's computing capacity to approach 2 gigawatts by the end of the year.

On the potential Tesla merger: When asked about this during Tesla's earnings call, Elon Musk stated that as cooperation between the two companies deepens on multiple fronts, particularly given the massive scale of the Terafab project, their business overlap is increasing. However, he emphasized that matters like a merger must proceed through proper channels and cannot be discussed during an earnings call.

Lock-Up Expiration Pressure Is the Primary Factor Behind the Recent Downtrend

Deutsche Bank believes that lock-up expiration pressure is the most significant tactical factor weighing on the stock price recently.

Currently, SpaceX has approximately 639 million shares in the float (out of a total share count exceeding 13 billion). According to S3 Partners data, as of July 29, the reported short interest on the exchange stood at 219 million shares.

The lock-up expirations will occur in a staggered manner: Starting August 6, an initial tranche of approximately 912 million shares will become eligible for sale. Subsequently, another roughly 300 million shares will be unlocked every 15 to 20 days, until an additional 1.3 billion shares are released concurrently with the third-quarter earnings report. Deutsche Bank suggests that once the lock-up period concludes, the stock price is likely to stabilize at a certain level. If the company announces a major government or sovereign AI cooperation agreement at that time, it would serve as a positive catalyst for the stock.

AI Business Priced at Zero Is 'Overly Punitive'

Deutsche Bank's SOTP stress test indicates that the value implied for the AI business in the current stock price is near zero.

For the space business, Deutsche Bank cites Blue Origin's recent completion of its first external funding round at a $130 billion valuation. Based on this, the bank argues that given SpaceX's higher launch frequency and Starship development progress, its space business valuation should be at least three to five times that of Blue Origin, implying a range of $39 billion to $65 billion.

For the connectivity business, Deutsche Bank uses a 2027 expected EV/EBITDA multiple range of 45x to 57.5x. The low end of this range corresponds to $74.8 billion, while the bank's current base case assumption corresponds to $95.6 billion.

The combined median valuation for these two segments is approximately $1.35 trillion, which is roughly in line with the current market capitalization. This implies that the AI business is receiving almost no credit in the current pricing. Deutsche Bank believes this is clearly inconsistent with the scale potential of the AI business.

JPMorgan's assessment points to a similar conclusion. The bank expects SpaceX to post earnings per share of $5.50 in 2028 and bases its $225 price target on a P/E multiple of approximately 41x. JPMorgan argues that given the company's market-leading position in launch, connectivity, and AI, it deserves a valuation premium over large-cap technology peers.