I'm LongbridgeAI, I can summarize articles.Wells Fargo analysts recommend selling Netflix and buying SpaceX ahead of their October 20 earnings reports. While Netflix faces headwinds from slowing growth and competition, Wells Fargo sees long-term potential in SpaceX, particularly regarding Starship's role in orbital AI data centers. Analyst Ken Gawrelski assigns an Overweight rating to SpaceX with a $212 price target, citing industry-leading launch capabilities and future expansion opportunities.
SpaceX (NASDAQ:SPCX) and Netflix (NASDAQ:NFLX) appeal to two very different groups of Wall Street investors, yet both face an important test when they report earnings on Tuesday, October 20. While one is betting on the future of space exploration and satellite communications, the other is trying to maintain its dominance in an entertainment industry where competition keeps getting tougher.
SpaceX has taken investors on quite a ride since its June IPO. Shares remain 11% above their $135 offering price, although they have lost 29% from their post-IPO high. Enthusiasm surrounding Starlink and the company's plans for orbital AI infrastructure has been tempered by concerns about execution timelines and the massive investments required to turn those projects into profitable operations.
Netflix endured a volatile year as well, with shares tumbling 26% amid slowing growth, disappointing viewing trends, and mounting competition from YouTube. Investors also worry that increased spending on original programming and newer entertainment formats could squeeze profit margins without generating enough audience growth to justify those investments.
But Wells Fargo analysts aren't judging these two stocks by their recent performance alone, with the investment firm recommending that investors sell one ahead of Tuesday's earnings while buying the other.
SpaceX's Biggest Opportunities Still Ahead
Wells Fargo analyst Ken Gawrelski sees long-term potential in SpaceX, particularly as the company moves closer to expanding its operations beyond satellite communications and traditional rocket launches.
Gawrelski points to SpaceX's "industry-leading launch capabilities as a core competitive advantage," arguing that its position in the industry could support several avenues for future growth.
Gawrelski's optimism rests heavily on Starship, particularly its potential to make orbital AI data centers commercially viable. The analyst expects partial second-stage reusability by 2029, followed by full recovery capabilities in 2030, allowing SpaceX to significantly increase the number of missions it can conduct annually.
The analyst forecasts 6.4 gigawatts of orbital computing capacity by the end of 2029, requiring more than 1,200 Starship launches to support that expansion.
Gawrelski also views Starship's 14th test flight as an important milestone, following its successful orbital deployment of 26 production Starlink V3 satellites. The analyst expects another two or three launches before year-end, with subsequent improvements potentially accelerating the expansion of the satellite network.
Tuesday's report should give investors a better understanding of how SpaceX intends to finance these projects while expanding its existing operations.
Reflecting his confidence in the company's longer-term prospects, Gawrelski assigns SPCX shares an Overweight (i.e., Buy) rating, accompanied by a $212 price target that suggests 41% upside over the next 12 months. (To watch Gawrelski's track record, click here)
Overall, SpaceX has no shortage of believers on Wall Street, with 28 of the 35 analysts covering the company recommending Buy, against just 5 Holds and 2 Sells. That enthusiasm translates into a Moderate Buy consensus rating, while the average 12-month price target of $217.50 implies 45% upside from current levels. (See SPCX stock forecast)