SpaceX joined the Nasdaq-100 yesterday morning. And everywhere you look, people are saying the same thing: "It joined the index, so the stock is going to skyrocket." At the same time, a major investment bank released a price target that implies nearly a fivefold return.
But if you dig a little deeper, the story is not quite that simple. There is a big catch beneath the surface.
So what actually happens when a company joins an index like the Nasdaq-100?
All the ETFs and mutual funds that track the index are required to buy its shares. That creates buying pressure. So far, so good.
"So does that mean the stock is guaranteed to go up?" Not necessarily.
According to JPMorgan estimates, SpaceX will enter the index with a weighting of around 1.3%, placing it roughly 21st within the Nasdaq-100. That puts it behind companies such as Nvidia, Walmart, Intel, and Tesla.
And this is the key point. The smaller a company's weighting, the fewer shares index-tracking funds are forced to buy.
Analysts have been clear about this, describing the inclusion as "less significant than investors expect" and saying that the amount of buying required is "much smaller than initially assumed."
As if that were not enough, there is another force working in the opposite direction: lockup expirations.
Insiders will gradually become eligible to sell shares in stages between 70 and 135 days after the June 12 IPO. Meanwhile, shares held by Elon Musk and other major investors will remain locked up for 366 days. One analyst at Susquehanna described this as a "short term headwind" for the stock.
And the real major catalyst?
It is not the Nasdaq inclusion at all. It is potential entry into the S&P 500.
That, however, is unlikely to happen before next year. S&P declined to fast track the company because it requires a longer history of profitability and roughly 12 months of operating maturity. In other words, the much larger wave of index driven demand remains out of reach for at least another year.
In the meantime, a Cboe strategist warned investors to expect a move of around $20, either higher or lower, over the next 11 days. Options trading is already running at roughly 2.5 times normal levels as traders rush to hedge their positions.
This is where things become even more interesting.
Raymond James initiated coverage with a Strong Buy rating and set a price target of $800.
Yes, you read that correctly.
With the stock closing at $149 on Tuesday, that target implies an upside of more than 530%.
What is driving such an aggressive forecast?
According to analyst Brian Gesuale, the answer is Starship, which he describes as "one of the defining industrial infrastructure companies of the 21st century."
The investment thesis is that Starship, capable of carrying more than 100 tons into orbit, transforms space launches from an expensive, difficult process into something resembling a transportation network with continuously falling costs.
That, in turn, could unlock a market the analyst estimates at around $30 trillion.
His comparison is ambitious. Just as railroads, electric power grids, and the Internet reshaped entire eras of economic development, he believes Starship could do the same for the space economy.
There is also an artificial intelligence angle.
According to the report, SpaceX could eventually build the world's lowest cost platform for converting electricity into useful AI compute.
It certainly sounds impressive.
But there is another important catch.
Roughly two out of every three analysts covering the stock currently rate it either Buy or Strong Buy.
However, Raymond James was also one of the IPO underwriters, alongside Goldman Sachs and Morgan Stanley. Its research note was published immediately after the mandatory 25 day quiet period expired.
As soon as that restriction ended, underwriters rushed out their research reports.
And here is the interesting part.
Most of them set price targets between $200 and $250.
Not $800.
