The Starry-Eyed Analysts Who Can’t See Beyond Their Own Projections

The latest stock price tumble for SpaceX has left Wall Street analysts scrambling to explain why their uniformly bullish predictions were so spectacularly wrong. Just days after a flurry of reports from top banks predicted the company’s stock would skyrocket, the shares plummeted below their initial public offering (IPO) price for the first time.

Analysts at 18 major banks forecast SpaceX’s value to reach as high as $800 by 2031, with a median estimate of $225 in just two years’ time. This would catapult the company’s valuation to an astonishing $3 trillion, dwarfing that of most other tech giants. The math behind these projections is jaw-dropping.

What’s striking is not only the unanimity of these forecasts but also their sheer audacity. When SpaceX debuted on the Nasdaq in June with a record-breaking IPO, its stock price surged to nearly $211 within three days. Since then, it has lost nearly 60% of its value, leaving even early investors facing significant losses.

The banks that underwrote the IPO stand to lose millions if they sell their shares now, yet they continue to tout SpaceX’s prospects with language that borders on hyperbole. Morgan Stanley praised its ecosystem as “AI’s final frontier,” while Bank of America credited Elon Musk’s creation for “paving the superhighway to the stars.” For Raymond James, SpaceX’s achievement will rival such breakthroughs as electrification, railroads, and the internet.

The problem with these projections is that they demonstrate a fundamental misunderstanding of how stock prices work. Rather than conducting rigorous analysis or making independent predictions, analysts appear to be simply following each other’s lead. “The analysts at one bank are highly influenced by the prices predicted by others,” notes Jay Ritter, the University of Florida professor who is the world’s leading expert on IPOs.

This phenomenon is not unique to SpaceX. It reflects a broader trend in which analysts prioritize groupthink over independent thinking. By relying on each other’s forecasts rather than conducting their own research, they create a self-reinforcing cycle that can lead to catastrophically bad predictions.

The unfeasibility of SpaceX’s projected growth is also a major concern. With its valuation already astronomical and losses mounting, the idea that investors will boost its stock price to $3 trillion by 2027 is nothing short of fanciful. Only 12 U.S. companies have a market capitalization of over $1 trillion, and for a company like SpaceX, which lost $4.9 billion on revenues of less than $19 billion last year, reaching such heights would require an unprecedented level of growth that defies economic logic.

The consequences of this groupthink are far-reaching. When analysts fail to critically evaluate companies and their prospects, they create a bubble that can burst with disastrous consequences for investors. This is precisely what has happened in the case of SpaceX, where even early backers face significant losses if they sell now.

As we watch the stock price continue to plummet, it’s worth asking: What will happen next? Will investors continue to pile into SpaceX’s shares, fueled by analysts’ optimistic projections? Or will reality finally catch up with the hype, sending the company’s value crashing back down to earth?

Only time will tell. But one thing is certain: the starry-eyed analysts who cannot see beyond their own projections have already failed to deliver on their promises.