Picture a landlord who tells you not to buy a rental property. The mortgage is steep, tenants can leave, and the numbers just don’t work.
Then those same tenants start renewing at higher rents. Suddenly, the landlord wants in. That’s a lot like the reversal playing out around SpaceX (SPCX) stock.
In August, Phillip Securities analyst Glenn Thum, attracting a 5-star rating by TipRanks (with an 80% historical success rate), was among Wall Street’s harshest skeptics, arguing that SpaceX’s powerful AI computing business rested on expensive equipment and contracts that might not last.
His $75 price target was the lowest in the analyst group.
Now, according to TheFly, after SpaceX reported surging computing sales and claimed its new servers could pay for themselves in less than a year, Thum is abandoning his Sell rating in favor of a Buy. Also, his 2027 revenue forecast has roughly tripled.
The turnaround is incredible, but there’s still a big question about whether SpaceX can continue charging premium rates for AI computing as its rivals race to build capacity.
Wall Street’s lowest SpaceX target just jumped from $75 to $250
Back in August, Thum was looking at SpaceX and seeing a problem that most on Wall Street were overlooking.
The Phillip Securities analyst questioned how reliably SpaceX could collect money from them, especially in its fast-growing AI computing business.
In that, he delivered a remarkably harsh verdict, slapping a $75 price target, with a Sell rating. Among the sell-side analysts being tracked, that was Wall Street’s lowest target.
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Two months later, he’s changed his mind in a big way.
On Oct. 23, after SpaceX reported Q3 earnings, Thum bumped the stock straight from Sell to Buy and lifted his target to $250. That’s a massive $175 increase, or 233.3%, in his estimate of where the shares could trade over the next year.
That said, his earlier skepticism had substance.
Some of SpaceX’s AI cloud contracts reportedly allowed customers to leave on 90 days’ notice after an initial ramp-up. One customer accounted for 19.5% of Q2 sales, making the business unusually dependent on a large buyer.
Meanwhile, building the data centers needed to serve those customers required enormous capital spending.
Thum previously considered SpaceX’s ability to retain and attract customers a major risk to the stock. Now, his forecast has changed dramatically. So, what exactly changed?
SpaceX’s AI rentals forced a threefold rethink of 2027 sales
SpaceX’s Q3 earnings explain why Thum sees a different company.
Revenue climbed 161% to $14.6 billion. More revealing, its AI business generated $7.6 billion, or roughly 52% of sales, which underscores how AI has already become a major source of revenue.
Elon Musk described the demand during the Oct. 20 earnings call. “We could rent out our compute several times over if we said yes to everyone.”
Additionally, company management says existing cloud contracts are being renewed at higher prices, while new computing capacity is paying for itself in less than a year at current rates.
On top of that, SpaceX’s finance chief said pricing for new capacity was slightly above the upper end of the 30-50-per-watt range discussed in the previous quarter. Musk added that even older Nvidia H100 chips were renting for more than when they were new.
Thum’s report puts it plainly: “Contracts are renewing at higher prices per watt.”
That said, healthier renewal prices also don’t eliminate the risk of customers leaving later. SpaceX must earn enough from its costly servers to justify building them.
Phillip Securities now forecasts $132 billion in 2027 revenue, up 201% from its previous estimate of approximately $43.9 billion. Interestingly, Thum didn’t arrive at his new valuation by changing his basic assumptions. He still uses a 10% discount rate and expects long-term growth of 3.5%, just as before.
Still, there’s an obvious caveat. If SpaceX is earning higher rental prices because computing power is scarce, what happens when the industry builds enough capacity to meet demand?
SpaceX’s $40 billion spending plan could test its newest bull
That said, SpaceX’s newest bull has a costly assumption to defend.
The company expects to drop $35 billion to $40 billion in CapEx in Q4, more than twice its $14.6 billion in Q3 sales. Much of that spending backs up its growing AI compute business.
The opportunity is obvious.
More servers mean more capacity to rent to customers scrambling for computing power. But that’s also the risk: If SpaceX and its rivals build capacity faster than demand grows, today’s premium rental prices may not last.
Even Glenn Thum, who just raised his SpaceX target from $75 to $250, acknowledges the danger of falling AI rental rates.
Consider what happens if customers negotiate cheaper contracts. The same expensive chips and data centers would take longer to pay for themselves. Suddenly, the assumptions underpinning Thum’s dramatic upgrade could seem overly optimistic.
SpaceX expects Q1 2027 revenue of $33 billion to $37 billion, giving investors a benchmark for its growth ambitions. But the next earnings reports need to reveal more than rising sales. Contract renewals, rental pricing, and returns on new computing equipment will matter just as much.
SpaceX post-earnings analyst price targets
- JPMorgan: Raised target to $500 from $240, maintaining Overweight.
- Cantor Fitzgerald: Raised target to $345 from $246, maintaining Overweight.
- Barclays: Raised target to $300 from $254, maintaining Overweight.
- Bank of America: Raised target to $275 from $235, maintaining Buy.
- Wells Fargo: Raised target to $274 from $214, maintaining Overweight.
- Sources: Investing, LongBridge, TipRanks
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