After spending 8 billion dollars to buy spectrum, investment bank Pivotal is optimistic that SpaceX (SPCX.US) will become the fourth largest operator in the US and reaffirms the “buy” rating

The Zhitong Finance App learned that investment bank Pivotal Research Group said that SpaceX (SPCX.US) may rise to become the fourth largest mobile operator in the US after reaching an agreement to acquire a national spectrum license for about 8 billion US dollars. The agency raised SpaceX's price target from $220 to $230 while reaffirming the “buy” rating.

In an October 12 research report, analyst Jeffrey Wolozak said that SpaceX plans to acquire Grain Management's 800 MHz spectrum portfolio. This move is expected to help Starlink (Starlink) expand from satellite broadband to traditional mobile phone services, initially targeting rural and suburban customers. The new target price has room for an increase of about 55% compared to the $147.95 stock price quoted in the report.

The deal was announced on October 8, and involves up to 14 MHz of paired spectrum, which is still subject to approval by the US Federal Communications Commission (FCC). According to Pivotal, the reported purchase price of $8 billion has yet to be confirmed by any party. Grain purchased this spectrum from T-Mobile (TMUS.US) in August with $2.9 billion in cash plus an additional spectrum license.

For investors, the acquisition could open up a new revenue stream for SpaceX while building a communications network to support Elon Musk's broader business, covering Tesla (TSLA.US), autonomous vehicles, and robots. Pivotal believes that combining satellite connectivity with existing Starlink broadband equipment will enable SpaceX to compete with infrastructure costs far lower than traditional operators.

The strategy relies on combining the newly acquired 800 MHz band (which can penetrate buildings and is compatible with existing phones) with the approximately 2 GHz spectrum previously obtained through the EchoStar deal. The FCC also recently approved a constellation of 15,000 second-generation satellites to support direct terminal communication. Half of them must be put into operation by October 2032, and the rest must be completed by October 2035.

Unlike traditional mobile operators that rely on large cellular base station networks, SpaceX can use Starlink antennas equipped with mobile radios to extend coverage to homes and surrounding communities. Pivotal estimates that this approach (excluding spectrum acquisitions) would cost around $10 billion, while a traditional national base station network would cost between $50 billion and $100 billion.

Volozak anticipates that Starlink Mobile (Starlink Mobile) will initially attract existing Starlink broadband users. These users can bundle home internet with mobile services, and rely heavily on Wi-Fi for indoor calls. The analyst believes that in densely populated urban markets, opportunities are more limited because established operators have much larger spectrum reserves and network capacity.

Pivotal predicts that by 2036, Starlink Mobile will have approximately 160 million subscribers worldwide, including 50 million in the US and 110 million in the international market. This will account for approximately 13% of the US mobile device market and 1.5% of the international market outside of China. The agency assumes that the global average monthly revenue per user will be around $22 by 2036.

The analyst predicts that Starlink Mobile will start adding new users at the end of 2027 or 2028, and its profit before interest, tax, depreciation and amortization (EBITDA) will be corrected in 2030. The business's EBITDA is likely to reach approximately $3.5 billion in 2032 and reach $15 billion by 2036, corresponding to a profit margin of 40%. Pivotal estimates that the cumulative capital expenditure from 2027 to 2036 was US$30.6 billion, including US$22.5 billion for spectrum and US$8.1 billion for satellites.

In addition to wireless services for consumers, Volozac also sees the strategic value of a communication network that can be controlled independently of traditional operators by SpaceX and Musk's other businesses. This infrastructure can support Tesla cars, Cybercab driverless taxis, Optimus humanoid robots, and energy facilities while reducing reliance on third-party wireless vendors. Pivotal also anticipates that mature operators may eventually buy access rights to the Starlink network in bulk to improve coverage in sparsely populated areas.

The report raised questions about the long-term impact of telecom infrastructure providers. Although Pivotal does not expect immediate pressure on dividends from established operators such as AT&T (T.US) and Verizon (VZ.US), the agency believes Starlink's lower cost architecture may eventually reduce demand for cellular base stations in some rural areas.

The analyst also warned that overseas expansion will require additional spectrum acquisitions and regulatory approvals, which may be difficult to obtain.

A bullish outlook comes with huge financial and execution risks. Pivotal estimates that SpaceX may need around $900 billion in additional financing over the next decade to support its broader expansion into satellite communications, launch services, and AI infrastructure. Other concerns include delays in Starship development, dilution of potential shareholders, regulatory hurdles, and the company's heavy reliance on Musk. The agency's valuation is also highly dependent on its financial performance as it nears the end of its 10-year forecast period.

Additionally, Morgan Stanley analyst Adam Jonas reiterated SpaceX's “overweight” rating and $300 target price in a report focusing on the upcoming 15th Starship flight on October 11.

Morgan Stanley believes that progress in fully reusable rockets is a potential catalyst for stock prices, and says lower launch costs and greater payload capacity can accelerate Starlink deployment and expand opportunities in the field of AI infrastructure and orbital computing.

Both agencies see SpaceX's transmission capability as central to their long-term growth, but Pivotal's latest report focuses more on the company's potential disruption to the wireless telecom market.