SpaceX (SPCX) has already convinced investors that rockets can be a serious business.

Now it has to prove they can behave more like airplanes.

Pivotal Research Group analyst Jeffrey Wlodarczak initiated coverage of Elon Musk’s space company with a Buy rating and $220 year-end 2027 price target, representing roughly 48% upside from SpaceX’s Sept. 11 closing price of $148.18. SpaceX shares rose following the call.

On the surface, the bull case rests on multiple huge opportunities: Starlink, satellite launches, military contracts, and maybe even AI computing in space.

But Wlodarczak’s thesis is much simpler than that.

SpaceX needs to make Starship reliably reusable.

If successful, Pivotal estimates launch costs could drop by over 90%, changing SpaceX’s existing economics.

That makes the $220 target less a standard earnings call and more a big gamble on an engineering breakthrough.

Starship is the number that matters for SpaceX

Starship will carry far more cargo than SpaceX’s Falcon 9, and both stages will ultimately become reusable.

Pivotal’s value is based on a future where individual Starships fly 20 to 50 times, with cheap maintenance and fast turnaround times between missions.

That’s important because reusable rockets affect the cost structure.

Old-school launch economics mean throwing away pricey gear. Repeated use of the same spacecraft spreads the manufacturing cost across multiple trips, which may reduce the cost of getting each kilogram into orbit.

SpaceX has already proved this concept with Falcon 9.

Starship is designed to take this capability much further.

Related: SpaceX stock price hinges on one massive engineering bet

Its huge payload capacity might let SpaceX deploy bigger groups of next-generation Starlink satellites and unlock markets that are now not viable because it costs too much to get enough gear into orbit.

But the Starship is not yet commercially operational.

That’s a rare divergence between SpaceX’s nearly $2 trillion valuation and the technology that underpins much of its future value.

The engineering still needs to keep up with the value.

Starlink could turn cheaper launches into recurring revenue

Why does Starship matter? Because SpaceX isn’t just selling rocket launches.

It has one of the biggest potential client bases for such initiatives.

Starlink is now SpaceX’s biggest source of income, providing the firm with a rare vertically integrated model: SpaceX develops rockets, launches its own satellites and then sells connection over the network.

That implies cheaper Starship launches might improve Starlink’s economics and accelerate deployment.

Pivotal expects SpaceX revenue to surge from an estimated $46.6 billion in 2026 to $118.2 billion in 2027. The firm projects adjusted EBITDA could nearly double from $11.2 billion to $22.3 billion.

Those assumptions are extraordinary.

But they do demonstrate why Wall Street is so eager to put so much value on Starship. A successful reusable vehicle would produce more than just launch revenues. It might reduce the infrastructure costs of SpaceX’s largest recurring-revenue business.

That is the second-order consequence investors should be watching.

SpaceX’s $220 bull case comes down to one engineering breakthrough

BRENDAN SMIALOWSKI / Getty Images

SpaceX’s AI opportunity could be even bigger

Then there’s the most speculative part of the value.

Artificial intelligence.

The cost and power needs of terrestrial AI data centers have led to interest in placing computer infrastructure in orbit, where solar power is plentiful and heat control works differently.

For SpaceX, that potential has one apparent prerequisite: affordable access to space for massive quantities of stuff.

Pivotal views reusable Starship flights as a way to make orbital computing possible.

Other experts are already placing great value on that prospect.

Morgan Stanley previously valued SpaceX using a sum-of-the-parts framework in which more than half of its $300 price target was attributable to AI-related operations, according to TheStreet.

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That does not make space-based AI data centers a sure-fire big business.

It implies investors are giving SpaceX a valuation much larger than that of a rocket firm.

SpaceX’s 48% upside comes with a massive catch

There is a danger to Pivotal’s bull case.

SpaceX thinks it will need about $1 trillion of financing over the next 10 years. The analyst’s base scenario also only has 65% likelihood built into its $220 goal.

Starship delays could undermine those projections. SpaceX also faces regulatory hurdles, enormous infrastructure requirements, and increasingly well-funded competitors.

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The stock has already shown how tough valuation may be.

SpaceX priced its historic June IPO at $135 and soared as high as almost $225 before selling off significantly.

But that unpredictability is precisely what Pivotal is focused on.

SpaceX doesn’t need every futuristic notion around the firm to succeed.

It requires a Starship.

If Musk can transform the world’s biggest rocket into a quickly reusable transportation system, SpaceX could launch more Starlink satellites for less money, increase launch capacity, and perhaps make orbital AI infrastructure economically viable.

If he can’t, then a big portion of the price is much tougher to explain.

Thus, although Wall Street’s new bull anticipates almost 50% upside, the most crucial figure for SpaceX investors may not be $220.

It may be 20 to 50, the number of times Pivotal believes each Starship eventually needs to fly.