00:00For more on SpaceX, Brett Lindsay, Missouri Managing Director and Head of Industrial Sector
00:04Research, joins us. Recently initiated on SpaceX. Has an outperformed rating with the stock
00:10price target of $200 per share. Brett, I appreciate that there's a clear thesis
00:17at the core of your coverage of SpaceX, right? But I wanted to get to the idea that I'm sat
00:22here at this desk during the Starship attempt last week. And it was amazing to see how quickly
00:29in after hours trading, the stock dropped, right? 4% in the moment because the test was
00:36aborted, right? The final moments. All of these future business lines on the AI side,
00:42NeoCloud side, Starlink, Orbital Data Center, they're all predicated on Starship, not just
00:49working, but being rapidly reusable. So could we just start there and sort of your response
00:54to tracking the cadence of Starship's development?
00:59Yeah, you bet. Thanks for having me on. So yeah, this was flight 13, recent delay.
01:03Was some minor technical issues that were identified pre-launch. And I remind you, this is version
01:11three. So it is a bigger, more powerful vehicle. They debuted it about two months ago. The automatic
01:17abort at ignition was really the function of four of the 33 Raptor engines on the booster
01:22didn't immediately light up and the onboard system caught it. It stood the vehicle down
01:27before the liftoff. And that's a safety system really doing what it's supposed to do. Musk
01:32in the team, they've identified the root cause within a few hours. Two engines are being swapped
01:38out. They're already back on the pad. They're targeting, as you mentioned, this Thursday for
01:42a relaunch. That's about a week of turnaround on a pretty complex rocket. I think these development
01:48programs that you've seen historically at this scale, you know, from a diagnosis and fix cycle,
01:55that's relatively quick versus anything that's structurally wrong with, you know, with the ship.
02:00So Brett, here's the thing. I'm reading your research. Investment thesis. SpaceX is not a rocket
02:07company. We're just talking about rockets. Explain your thesis.
02:18Yeah, no, absolutely. I would say that the, you know, the enabler of the Starlink opportunity and
02:25the connectivity opportunity longer term is going to be dependent on the success and the reusability
02:33cadence of Starship. Falcon 9 is the current vehicle they use this year. They've got really good visibility
02:40on some of the, you know, the payload to orbit, densifying the constellation for Starlink on the actual Falcon 9.
02:48But we do think long term it will hinge upon the success of Starship. You know, right now they do
02:55have a very,
02:56you know, big running start relative to the other competitive set. About 85 percent of all mass to orbit
03:02was, you know, was enabled by, you know, SpaceX over the last three years. And, you know, operational
03:09cadence will be important. These launches this year will be important. And they're, you know,
03:13they're making inroads and they're, you know, we'll see on Thursday. But yeah, that will be a big
03:18enabler and gating factor for the success over the next couple of years. Within your $200 price target,
03:24how do you sort of break out each business line within that price target?
03:31Yeah, no, it's a great question. So when we look at the, you know, the next three year roadmap,
03:36we're really taking a large discount relative to the AI platform. So near term, a lot of our price
03:43target is going to hinge upon the success of Starlink. And then some of what they're doing on space with
03:48the government contracts and some of the enterprise, most recently, some of the contracts with the
03:53airlines. We do think there is pretty good line of sight here in the near term. And we anchored our
03:59valuation on 2029 and actually took a pretty large haircut relative to what the internal plan
04:05is. And we're, you know, thinking that connectivity is more optionality around the stock and underwriting
04:12it on some of the near term fundamentals versus the long upshot on orbital data center in 2030 and
04:18beyond. Brett, do you model at all for any key man risk with with Elon Musk? You know, how do
04:27you kind
04:27of factor that into how you value the company as much as anything? Well, that's that's certainly a
04:34consideration, right? He's a he's a visionary. He's, you know, very involved in the operations in really
04:41across every single segment and division within the organization. You know, all that being said, you know,
04:46there is a there is a blueprint that's that's in place. The, you know, I'd say the most they've been
04:52able to develop some of the secular strengths across the business. And really, what they have is, you
04:58know, ownership within, you know, the launch capabilities in the US and across the globe.
05:03That is the key differentiator, as we're thinking about some of the optionality with the other segments
05:08down the road. So yeah, something always we consider. But, you know, he's built something
05:13from what was really a, you know, you know, a vision, you know, years ago, you know, over decades
05:18ago. And it's a it's a real company with real moats and defensibility in our view.
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