Transcript
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The host introduces Larry Goldberg and his SpaceX valuation model, covering base, high, and low cases as well as the methodology focusing on a two-year forecast period.
Speaker A
Is SpaceX stock worth double what it is today?Our guest, Larry Goldberg, spent weeks building his own valuation model and then ran 20,000 simulations through it.His base case has SpaceX stock worth $322 a share, roughly double today's price.But the same model says there's an 18% chance the equity is worth zero.How can both be true?
Here's how.Most of SpaceX value in his model comes from one business that barely exists yet.Orbital Data Centers.His base case puts 296 gigawatts of computing in orbit by 2040.And that only happens if Starship keeps driving launch costs down.
When it works, his high case reaches $1,337 a share.When it doesn't, the low case lands below zero.And the road there is expensive.In his base case, SpaceX burns 14 to 22 billion dollars every single quarter of 2027.Today's cash runs out by the end of that year.
And every one of his 20,000 simulations, every single one, needs outside money by the end of 2028.The median gap about $78 billion.Larry doesn't think raising it will be hard, but that's the honest cost of the prize.Across all the simulations, the median value lands at 228, with a 59% chance of beating today's close.And a single number that moves everything.
What orbital hardware costs per watt.That one assumption alone swings the value by $563 a share.Larry joins me today to walk through the whole model.The, the upside, the burn and the bad.He'll lay it out for you.Larry Goldberg is a serial entrepreneur and has been an active venture capital investor for the last decade.Check out lumisenti.com welcome Larry.
Speaker B
Hey, Herbert.Nice to be here.
Speaker A
Thank you so much Larry, for doing this.You.I've been leaning on you to give US updates on SpaceX.You know, a lot of the information we've shared already.Mach 33, Aaron Burnett's model.But you built your own model.
You spent months, weeks building this.And so you want to share with us what you found.And I love that you're using probabilities and simulation as well.So walk us through it.
Speaker C
Hey there.Thank you for joining me.
Speaker A
I've built a website that is the
Speaker C
most comprehensive resource for the Tesla and SpaceX investor.The prediction room tracks the likelihood of every major catalyst dive into a library of evidence based charts.
Speaker A
Follow Cybercab, Rollo, follow.
Speaker C
See every business post by Elon Musk and more.Please check it out.Simply go to brighter Finance co.Thank you very much.Let's get brighter.
Speaker B
Well, you know I build my own simply because I wanted to check how closely I'm, my thinking is to errands but this is similar to what I did with Tesla.In the beginning of my investment in Tesla I did my own analysis.I gave up doing that analysis because I found other people on in the community were doing as good if not a better job than I.And you know I'm looking at you sir and Basha but the, the point about doing your own simulation is to really understand the pieces better.It's one thing to read what Aaron does and you know they do a great job at Mach 33, a really great job.They're the most, they're the most detailed and deep thinking guys in the industry.So what I've come up with is kind of a different approach but it tells the same story.
There's a gigantic risk here.The reward is equivalent to the risk.It's very high but there's, the risk cannot be ignored.
So this is the result of several weeks of work.Some, you know, I start down one path and realize that it's not going to end well so I look at another path and so on.So let's just dive into it.This is the outcome of the, of the work.The base case that is to say sort of where, where the model sits in the middle is $322 a share.
So that really is what I think the share price should be today.
Now there are the reason it sits in that middle ground and we'll see how middling it is is because on the one hand we could see as much as $1,333.On the other hand we could be as low as $8.Now you know many people have also spoken about potential share price and so on and so forth.We have Ron Barron talking about, you know, tens of thousands of dollars per share and it's more than possible.What I'm looking at is just taking the next two years, looking at what's going to happen over the next two years and looking and then bringing that back to today's share price.And I think that's probably as good a method as any and it's a very conservative method.So I'm not looking at cash flows over 10 years.I'm not looking at 20 years of revenue.I'm looking, you know exactly what's going to happen in the next two years and there's significant risks and I'm going to talk about some of the risks and where the real problems, where the real risks lie.
But you know, that's, that's the bottom line of what I'm looking at is I'm seeing that the average, that the share price today, based upon what I see coming and the chances, the opportunities and the, the risks, it should be around $320.
And there's a chance, there's a low chance, but there's a chance of it going down to zero.It can't go to minus eight and go to zero.And there's a good chance of it going to $1,337, as we'll see.
Speaker A
Gotcha.And then do you actually give price targets of what you think it might be in a couple years or five years from now or.No, this is just really what is the value of it today based on?
Speaker B
Yeah, I'm, I mark my, I have a portfolio in my family office.I mark it every quarter.I'm required to by the basis of the, of the foundation of the company.I'm required to market.
I do market and I look to what is the number I need to market by now?Some people spin out cash flows for 10 years and take a present value of those cash flows.I don't, I look at what is the stock price likely to be based upon all the knowledge that we have.And in a public company, it's very easy to take the stock price on the day of the mark.And that's fair.
Larry explains projected cash burn through 2027, the need for external funding by 2028, credit market uncertainties, and how terrestrial and orbital data center costs feed into the model.
Speaker B
The problem is that the risks attached to that, the question is, are those risks reasonable?Is the share price what I think is where it should be?And I'm certainly not going to mark the stock at $322, but I'm going to mark it at whatever the current price is.But I want to be comfortable with what that price is.Does that explain where I am?
Speaker A
Yep, absolutely.And I like that you have both the low and high as well.So you're, you're being as as objective as possible.Okay, let's keep going.
Speaker B
So here's the biggest risk to the company and my judgment.
Cash is going to run out.And when does it run out?Well, we showed at cash reach as zero in the Q4 of 2027.That's Q4 of the year coming up.But that's really not the story because functionally we're at zero on Q3 of 2027.If we want to keep a 15 billion minimum cash in the bank or a little bit above that.So we really only have a year of cash on hand.
And so, you know, we have to think about we're going to get down to like $48 million negative.We're going to need $62.5 billion of new funding by Q4, 2028.I would consider this the biggest risk in the company.
Speaker A
Okay.
Speaker B
And the reason it's the biggest risk in the company is because we don't know what's going to happen to the credit markets in this period of time.
There's already red lights flashing in the credit markets.Some of these companies that have to build out this gigantic amount of compute, and we'll talk about that, are facing red lights in terms of the credit markets.That is to say, their debt is being marked down by a fairly significant amount.And if this becomes, if this becomes a problem, then SpaceX is going to have to scale back their plans and that scaling back of their plans could impact the share price.So I would say this is risk one in SpaceX.
Speaker A
Now, Larry, does this take into account the $40 billion credit that they've lined up and does this take on account the six, the, the potential of ROI of a terrestrial data center rental being paid back within a year?
Speaker B
The data center rentals are in here.And I've taken what I think to be a reasonable amount of money based upon the contracts that they have.But really the data center is not the money.Yeah, it's the, it's the space based compute that is the real investment.
So if you look at SpaceX and you think, my goodness, they're earning a huge amount of money for the, for their data centers, that huge amount of money is pitifully small when you compare to the investment in space based.Okay, so got you.That's the bottom line.
Speaker A
The cost to build space based Orbital is going to be even more than the rental that they're getting now.So Even though they're $100 billion revenue and then maybe next year they'll get to 200, 300 even more billion dollars of revenue from the terrestrial.
The cost of what they need to do to get to Orbital is high.
Speaker B
Yeah.
Speaker A
Okay.
Speaker B
That's the bottom line.That's the bottom line.
And by the way, this does include the dollars for the build out of terrafab.I don't know if it's right or wrong, but I've taken a swag on what they have to invest in terrafab based upon what I've read and you know, it goes into the randomizers, it goes into the statistics, and so it's in here as well.It's in here as well.Good.So the very last thing we want to do is stop building out the, the terrestrial, the, the space based compute because we run out of money.
So this is important.Now from that 62 billion or 80 billion, whatever the number, 77 billion, whatever that number is, you can deduct the 40 billion and that would give us another, another three or four quarters of run rate on, on this graph.But as I understand it, that's not an agreement that's been signed yet.And in such a fragile debt market, I wouldn't make any assumptions about anything.
Speaker A
I understand.
Okay, so it was just a rumor, it wasn't finalized.And so let's, you can't put it in yet.
Speaker B
Okay, great.
Speaker A
That's very fair.Very fair.
Speaker B
So here, here's the spread of possibilities.You know, I take my best guess at each line item and then I let the Monte Carlo run.And that what that random, that randomizes every line item and then aggregates them.And so we've got this really strange looking curve where we have two peaks actually where our discounted cash flow value over the next 10 years gets discounted back.And in this randomized trial and then in this randomized run and then we see that pten.
In other words, there's about 10% of the trials actually come out at this number down to negative, negative value.So about 10% of the trial of the runs came out with a negative value.
Speaker A
Wow.
Speaker B
But 90% of the runs all came out with having in its realm of possibility the $500.So definitely, if you look at them, this thing skews towards the higher end and the mid range.The P50 is at the 228 compared to the close of 156.This is the close here.This is the P50 here.
So I think, I think it skews to the, it skews to the, the good side of the, of the, the run.But the possibility always remains of the.
Speaker A
Got you man.This is so good.This is one of the best analysis I've seen because you're not just saying, oh, I'm very bullish.Things are going to look well, you run a probability analysis on it and you go, yeah, there's a 90 chance things go well.But then there's a 10 chance.If you don't raise enough money because this costs a lot, you, you get into trouble and then you can go to zero because you run out of money.
Speaker B
I mean there are, there are two or three major risks.
Speaker A
Okay.
Speaker B
I would say the first major risk in this entire thing is credit and we could de risk that by arranging credit lines early.And second big risk is whether there is any technical problem about the technical or financial or technique.Technical, technical cost risk in the, in
Speaker A
the orbital compute takes longer to build it, get it right.
Speaker B
Cost more just doesn't work technically or the cost per unit is to, the cost per compute is too high.
Those are the.If you look at those three risks, you know, do you risk any one of those three?And I think your opportunity value starts climbing and your risk starts dropping.
But I think this is something that, you know, any analyst who's really looked at this knows.But, and that's why I've done it this way rather than looked at each little business and did a study of each little business and then, you know, did a aggregate them more.
The odds do tilt above the close because, you know, I showed those P values and those P values all cluster around the higher end rather than the lower end.
The conversation covers the Monte Carlo simulation results, the distribution of outcomes with P50, P39, and P11 probabilities, and expectations for when the market will align with the modeled value.
Speaker B
So the share of Monte Carlo trials that land above each share price, 30, 39% land above it, 59% land above $156 close.So there's a 60% chance that we're going to exceed the current share price.Okay.There's a 39% chance that we can land above $300 a share and there's an 11% chance that we'll land above $500 a share.
Speaker A
What is that, Larry?So you're basically saying that as of October 13, couple days ago, after we were recording this on a Thursday, it's 60% chance going to be the.Above the current close of Thursday, $156.But what's, what is, what is this above 300?What is above 500?When is that?When.
Speaker B
So this goes through 27, okay.To December 27th.
Speaker A
Okay.
Speaker B
Now what this is really saying is that there's a 59% probability that stock is really worth more than $156.There's a 39% probability that the stock is worth more than $300 and there's an 11% probability that the stock is worth More than $500 a share.
Today.
Speaker A
Today.
Speaker B
Yeah, that's what this is saying.I'm just telling you that I would expect the market to catch up within two years.Gotcha.
But, but what, what, what the calculation is is what is the value of the stock today based upon the probabilities.So if the stock, if people read my analysis and they agree with my analysis and everybody read it and everybody acted accordingly, the stock would rise to something like, I don't know, 300, somewhere between 156 and $300 a share.Call it $225.
Speaker A
Yes.
Speaker B
Okay, does that make it a little clearer?
Speaker A
Yeah, very clear now.Yeah, I'm getting it now.Yes, you ran all these trials and then this is the Monte Carlo probability, where should be today.
Speaker B
Yeah, this is very good.And, and, and in answer to your question, when do I expect it to happen?I think it could take two years for this all to clarify to people and then, yeah, then they'll have caught up.Well, but if they all did this number, if everybody did, you know, did this exercise, they would bid the price of the stock up to that level.
Speaker A
I guess the biggest question I, I have right now would be you named two or three of the biggest risks that SpaceX has.You can even bring it to zero.When would we be clarified that those risks are no longer risks or reduce risks?
Speaker B
Yeah, I would say by the end of next year.Okay, but then, then you're going to see a stock price significantly higher than the mid range here.You're going to see it, you know, in that 6, 500 to $600 range.
Speaker A
Okay.
Speaker B
Some pundits have it even higher, but you know, the, that 11% that, that is in there by the end of next year could climb to the 70% range if, if we discover the numbers that we, that are in the mid range of our, of our guesses is correct.
Yeah.I will tell you this.I believe my numbers are a lot more conservative than Mark 33s and.
Speaker A
They're conservative.They're very conservative.
Speaker B
Yeah.But, but just to put a point to it, you know, Elon actually did retweet this, my, my tweet from this.
Speaker A
Oh, he did?
Speaker B
Yeah.Okay, he did.So, but then he went on to tweet a little bit later on that the company is going to exceed, you know, trillions of dollars.
Speaker A
Yes.
Speaker B
In revenue, which is much.In 10 years.Within less than 10 years.
Because he was answering, you know, Ron Barron's comment.So what, what that tells me is that yes, he retweeted this, but he is much more bullish than this is.
Speaker A
You know what I, what I like about the way Elon runs his business is he's doing what you just did, which is identify the two or three most critical, what is it?The risk factor, risks that they have to achieve.And if he feels that that's the biggest risk, I'm going to try to figure out, solve it.That's the way he mind things.That's the way you just outlined it.So if he solves these three that you learned earlier, then the chance of it going up to this crazy number that he talks about is a lot higher.There is always that 10% chance that it will fail if you can't solve the credit the money and then proof that this works and the price that works out.Yeah.
Speaker B
You know, and we have to say it's very important to say this is not investment advice.This is just my noodling and for what it's worth.And you know, so that's why, you know, I was a little surprised that Elon Repeat retweeted it because he's not often retweeted any financial analysis I've done before.But, but you know, I appreciate that he retweeted it even though it doesn't reach the levels that he thinks.But, but on the other hand it is saying that, look, it's worth the, the stock is worth a lot more than it's currently trading at.
Yeah.You know, on, on an object, on a fairly objective basis.And then I have one more, well, two more slides to show which I would like to talk about because everything turns on this top line.This is what they call a tornado graph.But this shows you what's the key factor?
What is the key factor?And look at this.Orbital capex by far the biggest risk.And right now the risks almost outweigh the benefits.The revenue.Look at the risks and the revenue.And look at the Orbital.Orbital gigawatts deployed.The top three valuation metrics that count the most are orbital.Orbital, Orbital.
And then the discount rate is a little, has a little to do it.The kilowatt per ton of the spa of starship.The number of Starlink subscribers.We're down, you know, like the fourth or the fifth.No, it's not even the fourth.
A tornado graph is presented showing orbital capex per watt as the dominant valuation driver, followed by discount rate and Starship metrics, with terrestrial data centers playing a minor role.
Speaker B
It's the, it's the sixth, sixth highest risk and the seventh highest risk is Starlink.The flight rate.It, you know, you can only improve from the, the starship flight rate.We've taken a very, very modest view of that.Terminal growth is important and to, you know, so the, the gigawatt hours that we do at the terrestrial.And this is the one everybody's focused on.That's your first question you asked me.And look where it is in terms of the raised value or risk factor.
Speaker A
I see.So terrestrial, despite the how much money that brings in $100 billion revenue per year.
Speaker B
It's actually, yeah, it fades into insignificance compared to Orbital.
Speaker A
But I guess I'm confused because SpaceX is not that expensive right now.It's like, what is the market cap of SpaceX?1.51 to $2 trillion.
Speaker B
Around that.
Speaker A
Yeah, it's not, it's like, or terrestrial data center should support that valuation.
Just that alone,
Speaker B
that.I'm not sure that that's true.
Speaker A
If you have $500 billion of revenue per year, you're getting close to what the other Mag 7 guys are getting right now.
Speaker B
Yeah, but almost all of the Mag 7, that's a small part of their business.
I mean, they have software that they don't have to lay out a penny for and that's what their principal revenue is.Well, that's not true of Amazon.Well, even of Amazon.So I mean, yeah, the, the amount of hardware you have to put into the ground in order to retrieve that return, you know, it's pretty high.And I don't know.
Okay, it's hard when you say.
Speaker A
Yeah, yeah, Orbital cap X dollars per watt.Like, is that the, like how much money it takes to build an orbital data center and then to get it up into space?
Speaker B
Yeah.
Okay.
Speaker A
Huh.
Speaker B
Capex in space is determined by the cost of each satellite compared to what it can actually retrieve, deliver by way of data.But I mean, it is going to be like 70 to 80% of the revenue of this company.
I mean, if we didn't have orbital data centers, our stock price today would be much higher.
Because there's not a big red line.
Speaker A
That is very interesting, Larry.So basically you're saying if this company SpaceX said we're not going to go through this crazy expensive path of truly shooting to the moon, like shooting to the stars of this orbital data centers, then the cost.Terrafab would be spending so much money, we can have a nice business, a really nice business of terrestrial data centers.
Speaker B
Fantastic business.I mean, look, the swing per share from orbital hardware, cost per watt is the largest driver in the model.
There it is.
Speaker A
Both ways.
Speaker B
Both ways.
Speaker A
Both ways.Both ways.
Speaker B
Yeah.
Speaker A
Potential upside.
Speaker B
But also this is the risk that's suppressing the stock price.Yeah, this is, what's.This is not even elevating the stock price.
All of the money right now is in this area of the, of the graph.
Speaker A
Too scary for people.So will this change over as the time goes below?
Speaker B
Yeah, ye.Everything below this line?No, everything below this line.
Speaker A
Next year, would the risk be less and then the blue be more?
Speaker B
Yes, yes.Okay, so closer we get once we've actually tested these star, these satellites in space and we've got a handle on its cost?Yes, Airing turns.
Speaker A
I see.Okay.
Speaker B
Because right now you've got two businesses.You've got this business down here and you've got this business up here.And this is the big, big overhang.
Okay.Okay.This is very, you know, it's only Elon Musk, he's the only guy in the world who would take the kind of risk that he's taking because he understands, you know, what the physics are.
So, you know, I said in my, in my closing statement in my tweet, and I debated a long time whether to share this.Actually, I had it finished a little bit earlier.I've updated it slightly, but I debated for a long time and I thought I wouldn't share it and so on, but I finally decided to share it.And what I say here is Elon has done it before, but this is a whole new level of.And I said endeavor, but really what I mean is it's a whole new level of risk.
I bet huge risk reward.
Speaker A
I see, Larry, that is very insightful.First of all, I appreciate that you're being very honest about it, being very objective about it.People think that you're such a bull on SpaceX because you've, you know, you got stock in it, but actually because you have money in it, you're actually very careful.You yourself want to look at it carefully.
This is how you left your post on X, you said, so I'm left where I started.This is a bet on starship making Orbital Compute chip cheap.If that happens, the upside is enormous.This is a bet on elon and the SpaceX team.They've done it before.
These are my own model estimates.None of this investment advice.
Speaker B
Yeah, look, I could sell all my SpaceX stock now, but I can't, I'm locked up.But when it unlocks, I could sell it all and make a very substantial profit.You know, it's eight figure type of number.
But.
I now have to make a decision.
Larry discusses personal hold-sell decisions, timelines for risk mitigation, potential competition, the case for combining SpaceX and Tesla, and wraps up the session with final thoughts.
Speaker B
Do I stay with that bit for another 5 to 10 years?Is this something I want to leave my family with?Because I don't know that I'll be around then, but I have to make that decision.And then I think, well, if I sell even part of it, which is not small money, I've got to redeploy it.So I've got to evaluate do I hold, sell or even buy more.
And you know, that's what this is all about for me.Other people are in different positions, but honestly, I've been buying up to 160.I stopped buying when it got above 160, I'm going to start buying, but I'm not buying in the million dollar class range.But I am buying, I am accumulating.And I've been accumulating because this has given me a lot of confidence.
Speaker A
When will, I'm gonna have to ask the same question.When will we know whether or not these risks have been mitigated?
Speaker B
That's such a good question.
Speaker A
So like, so next year they promise again, it's always.Time lanes are always different.Like they'll say it's next year, but it could be two years from now that they're going to actually have and Jensen Huang said it so that Elon, they're going to have a nv, blah blah blah blah, a version of their satellite up there.Not in next year, but it could be just one.Is that going to be enough for you to know enough, a little bit more data to kind of give you confidence or no?
Speaker B
I think, yeah, yeah, your question is very apt.And I think before mid year, next year we will have a Vera Rubin chip, right?
Or even maybe an earlier, you know, an earlier chip than Vera Rubin.But I think before mid year, next year we will have a data processing satellite and we will know what the parameters are of running it.And that will pretty well close out the risk one way or the other.
Speaker A
Okay.
Speaker B
Once we know our true cost, once we know our true throughput, there are other technical problems.
Don't get me wrong.It's not just limited to the cooling of the chip and the chip itself.And you know, there's communication, there's, there's laser, there's, you know, the whole compute capability of, you know, and how they configure the, the clusters.And there's a lot to go wrong.A lot to go wrong.But those are relatively minor.They're relatively easily solved.The big solve is can we, can we do this economically and can we do this in at scale?If we can do it economically at scale, nobody can compete.Nobody can compete.
Well that's not true.Amazon could possibly compete and you know, sorry, blue origin slash, Amazon could possibly compete and that would be a good thing.That's not a bad thing.That would be a good thing.There's plenty to go around but it's, it's limited to a very few, few number of people.
China is a good three to five years away from this.Amazon Bezos is probably a year away, maybe even a longer period of time.So you know, nobody's going to be able to compete at the scale that we're able to operate okay.
Speaker A
One of the things you're really good at is the money, the capital.That's your background.
You've been hitting it perfectly for Tesla's capital needs and what your expectations were.And now you've done the same thing here for SpaceX and these are bigger numbers.
Speaker B
And so it's all relative, you know, I mean SpaceX, Tesla's got a $40 billion plan on hand.SpaceX now has this 100 billion dollar plan on hand.Combined it's 140 billion and you know, they only have, by the way, and that's before Terrafab, but between them, they have 140 billion on hand between them.
So we'll see.I mean I, I think, I think the merger between SpaceX and Tesla now becomes so important because the, the ability to raise money at the scale is, you know, I think Tesla becomes a lot of muscle.A lot.
Speaker A
It becomes easier if you combine the two companies to be able to raise the money that you just said is the biggest concern.One of the top risks is money.The second, the biggest risk is orbital cost per compute.Getting it up.
Speaker B
Yeah, correct.
Speaker A
Orbital.Orbital.Orbital.Wow, Larry, this is, you know, I thought I knew SpaceX.
I thought terrestrial data centers is pretty good for valuation.But no, you've, I think the big
Speaker B
news of the day though is CERN's news.CERN really nailed it.Figuring out that this data center, new data center development in Brownsville, I mean that was I think very, very important news today.So hats off.Yeah, that's to cern.
Speaker A
Well, I mean it's expected because I did a show with Brian Wang and he was already pointing out that there if they're, they're planning on building new mini hards right in that area of both Nashville and then now also Texas next year.So we're gonna, we're gonna, we're spotting people are like you know, searching for where are these spots but.
Speaker B
Right, right, right.
Speaker C
Okay.
Speaker A
This is a very important show for any SpaceX investor.Really appreciate you doing the work and I super appreciate that you took a very objective view at it.That is very important.Thank you.
Speaker B
Thank you Larry.Thank you.
Speaker C
Appreciate you.
Speaker A
Follow Larry, follow him.Elon does he likes your tweets.
Check out his [email protected].
Speaker B
thank you everybody.
Speaker C
Hey there.Thank you for joining me.
Speaker A
I've built a website that is the
Speaker C
most comprehensive resource for the Tesla and SpaceX investor.Please check it out.Simply go to Brighter Finance co.Thank you very much.Let's get Brighter.