Morgan Stanley: SpaceX Value Could Grow to $50 Billion
SpaceX launched its 12th resupply mission to the International Space Station from NASA’s Kennedy Space Center in Florida at 12:31 p.m. EDT on Monday, Aug. 14, 2017. (Credit: NASA Television)
An interesting analysis of SpaceX by Morgan Stanley.
SpaceX could become a $50 billion juggernaut through its launch of a satellite broadband network, a team of Morgan Stanley analysts wrote in a report Thursday….
Morgan Stanley says SpaceX developing reusable rockets is “an elevator to low Earth orbit.”
“When Elisha Otis demonstrated the safety elevator in 1854, the public may have struggled to comprehend the impact on architecture and city design. Roughly 20 years later, every multistory building in New York, Boston, and Chicago was constructed around a central elevator shaft,” Morgan Stanley said. “It all comes down to SpaceX.”
Reducing the cost to launch a satellite to about $60 million, from the $200 million that United Launch Alliance charged through most of the last decade, was a monumental breakthrough. SpaceX is trying to reduce its cost to $5 million per mission, and Morgan Stanley says the launch business “generates limited operating income.”
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10 responses to “Morgan Stanley: SpaceX Value Could Grow to $50 Billion”
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Interesting analysis, but I usually worry when the banking industry takes notice, it is like a shark eyeing your surf board 🙂
Look for example what happened to XCOR when the venture capitalists started investing in it.
If Space X pulls off their Mars plan, they need to give some serious thoughts at building a “B Arc” as described in “The Hitchhikers Guide to the Galaxy”.
It would be nice if we could “vote people off of the island” and send them to Mars in Elon’s B Ark.
It’s amazing how many people cite that part while ignoring Adams very next paragraph.
Cut me some slack jack, I read it 29 years ago. 🙂 What does it say? Do you mean that earthlings descended from the “B Arc”?
That immediately after sending off the B Ark, the rest of the Golgafrincham race died.
It always amazes me that people who snark how “we need a B Ark” ignore what Adams was actually saying about this kind of dickishness, this kind of smug cleverness, even while he himself was being dickish about the “kind of people” that made up the B Arkers.
Morgan Stanley’s evaluation has to include a whole bunch of guess work. SpaceX is very tight lipped about it’s finances. They have also loaned lots of money to Tesla and Solar City, when Solar City was a standalone business. That’s a tremendous amount of risk as Tesla isn’t profitable and are currently struggling to get their latest product out of the factory door in any volume before they are faced with a tremendous amount of competition in a traditionally low-margin market.
Is SpaceX spending too much money on a Mars project that doesn’t seem to have any near term financial return and darn little in the long term aside from PR?
Is $60 million enough? That’s roughly what SpaceX charges for a F9 mission, but only those in the launching business can tell if that might be too low or not. With such a complex and low volume product, the business costs can be a significant and worrisome percentage. If you have a factory with a machine that stamps out widgets in the thousands, the percentage of Selling, General & Administrative costs (SG&A) amortize to only a tiny fraction of 1% of the widget’s cost. When you are building 10-12 of something a year that requires a large organization to support it, that SG&A can’t be ignored. Profit for R&D is needed as well as some cushion to allow for rework or the scrapping of non-confoming parts. If you are highly vertically integrated, you can’t send a batch of parts back to a vendor for replacement or credit, you have a accept that liability and eat the cost yourself. Pass the mustard, please.
Is SpaceX truly “disruptive”? Without a look at their books, there is no way to know.
Given how well the establishment got the real estate collapse of 2008, and the fact that the lunatic fringe of economists got it so so right (Then got everything else wrong), my faith in economics as a hard science took a huge hit. It’s mostly guess work, and tainted by institutional group think, vested interest, and a desire to push the market in one direction or another to favor the reporting institution.
I’ve actually been impressed with how well the neo-Keynesians have predicted cause/effect of everything that followed the collapse.
So, mindlessly regurgitating Krugman,
The real-estate collapse itself was reasonably well predicted (plenty of warnings about the bubble before it burst. Along with idiots saying “no, this time it’s real”, which happens in every bubble.)
What the mainstream macro-economists missed was scale of the subsequent run on the banks, because regulations & systems developed over the past century were meant to protect against that. What they missed was that finance deregulation had created an enormous and effectively unregulated global “shadow” banking sector. Once they saw that, they could say, “Oh, this is just Diamond-Dybvig (a model of bank runs developed in the early ’80s), therefore [this] is what will happen”, which happened. (Such as the global freezing of liquidity, and the ripple effect of that through every other industry…) Hence they could then map the deflationary spiral against wage/price-stickiness ruining the ability of central banks to stop the damage through their usual measures, the consequences of fiscal stimulus (or lack thereof), the relative effects of different levels of QE monetary policy (high in the US, low in the EU), etc etc.
People like Krugman (and the economists he writes about, so-called “salt water” economists), saw the similarity with the mechanics of the Great Depression, predicted that the US stimulus was about three-fold too small (“Madness!” cried others, “It’ll cause massive inflation!”, and of course the stimulus was then swallowed with barely a trace.) They predicted that the massive QE money-pumping in the US wouldn’t cause inflation (just help ease deflation) and the lower scale QE in the EU would harm its recovery by forcing them to rely more on deflationary pressure, which is more destructive to the underlying economy. (Which happened, the US economy recovered quicker and better than Europe.) And he/they predicted that without ongoing fiscal stimulus of a sufficient scale, aimed at heating the bottom of the economy, any QE driven recovery would tend to affect only the top of the economy, not reaching where 99% of people live. (And sure enough, while stock prices recovered, while corporate profits returned, while headline figures improved, the economic reality for the majority of people has stagnated.)
The people who got it wrong were the supply-side type economists and especially the Chicago/Austrian school. Those people just happened to be the favourites of the conservatives, whether US Republican politicians or German bankers, because they told those conservatives what they wanted to hear to justify policies they already wanted to introduce. Austerity, punish the poor, punish the EU fringe, etc. And those people have been utterly wrong about every prediction they’ve made. (For eg, they screeched about inflation (even hyperinflation) from QE and sustained low interest rates, they pushed for higher “normal” interest rates to quell the predicted inflation, they made excuse after excuse for why it didn’t happen. Even increasing of the supply of money three-fold without inflation didn’t convince them we were in a destructive deflationary spiral; nor when fiscal austerity in different nations mapped perfectly (but inversely) with their economic recovery. They (and the politicians) still don’t accept that they were wrong.)
I would elaborate on that that the “Greek crisis” in Europe which hit hard the banking system was self-induced by European banking regulation which caused an effect similar to the run on government bonds and a spiral effect.
Finally QE was started but quite many punches to real economy had been made (because contrary to some simplified neoclassical models institutions like banking are not neutral to “real” output).