SpaceX faces 70% downside risk after IPO surge, analyst warns

SpaceX stock could lose nearly three-quarters of its value as three catalysts threaten to puncture the post-IPO rally, one analyst says.

SpaceX shares have surged as much as 61% since their market debut last week, but one analyst says the stock's fair value is roughly $63 a share — implying a 70% decline from Wednesday's close.

"We're investing in the Elon Musk cult," said Paul Meeks, managing director and head of technology research at Freedom Capital Markets. "I would think that we've seen the top."

The stock, initially priced at $135, climbed to a high of $218 before retreating 3% on Wednesday and another 6.5% on Thursday, trading near $192. Options-implied volatility clocked in at 97.5%, meaning investors are pricing in a potential 97% swing in either direction over the next year — extreme even by mega-cap IPO standards. The company recorded a net loss of $4.9 billion in 2025, while its AI business, xAI, lost $6.4 billion.

Meeks identified three near-term catalysts that could spark a decline: additional share issuance that would dilute the current 4% public float, fading AI enthusiasm tied to xAI's performance, and SpaceX's first earnings report as a public company expected in August — just before insider lock-ups begin to expire.

SpaceX sold less than 5% of its shares in the IPO, creating a scarcity effect that helped propel the stock higher. The company's amended S-1 filing notes it could issue more shares in the future for "a variety of corporate purposes," a move that would expand the public float and potentially pressure the stock. Nvidia, by comparison, has a public float of 96%.

The AI thesis underpinning SpaceX's valuation also faces scrutiny. Investors have priced in future revenue from orbital data centers and other AI-related ventures, but xAI generated a $6.4 billion loss last year. "The basis of this AI company is xAI, which has not been very successful," Meeks said. He added that the stock's future performance will depend more on "what people feel about the AI theme" than on near-term fundamentals.

SpaceX's first quarterly earnings report as a public company, expected in August, could prove decisive. The report will arrive just before the first wave of insider lock-ups expires, giving investors their first clear look at how the company's financials square with a valuation that has already drawn skepticism from prominent investors. Morningstar pegged the stock's fair value at $63 a share, with a best-case scenario of $70. Michael Burry, the investor known for betting against the housing market before the 2008 financial crisis, said the stock is moving on "hype" and that the company is likely worth less than $1 trillion. Nobel economist Paul Krugman called SpaceX a "$2.75 trillion meme stock."

The company's Bitcoin treasury adds another layer of complexity. SpaceX holds a significant position in Bitcoin, linking its stock performance to cryptocurrency market dynamics. That connection could amplify volatility in both directions, potentially attracting crypto-focused investors while deterring those with lower risk tolerance.

Other analysts have taken a more bullish stance. Arete initiated coverage with a buy rating and a $401 price target, implying a $5.3 trillion market capitalization, while Oppenheimer raised its price target to $250 per share, citing SpaceX's $60 billion deal to acquire Cursor and its growing AI capabilities. Tom Sosnoff, chief executive at LossDog, predicted the stock will trade below its $135 IPO price before year-end, saying he sold his allocation at $158 and shifted to exploiting the options market's extreme skew.

"At some point, you can't just buy this thing based on this $28 trillion total market opportunity," Meeks said. "They've got to start delivering the mail, and I think that'll rattle some cages."

This article is for informational purposes only and does not constitute investment advice.