Why SpaceX stock is crashing around 5% after a 3-day rally

SpaceX stock SPCX fell sharply on Tuesday after a three-day rally pushed the stock back above its $135 initial public offering price.

The stock fell around 5% to $131.94 in afternoon trading.

Despite Tuesday's decline, the stock remained about 18% higher over the previous five sessions.

The pullback follows a sharp rebound that had taken SpaceX shares back above their IPO price.

Investors had been closely watching the first lock-up expiration last week, when a large block of restricted shares became eligible for trading. The expected wave of selling did not materialize.

Next share unlock comes into focus

SpaceX shares have fallen substantially from their June 16 record close of $201.80.

The stock had lost more than 30% from that level ahead of the first lock-up expiration before rebounding.

With the initial share release passing without the heavy selling some investors had anticipated, attention is now shifting to the next scheduled unlock on August 20.

That event is expected to release another 7% tranche of restricted employee and pre-IPO shares, representing roughly 320 million shares.

The additional supply seems to be prompting some investors to reduce risk after the recent rally, while short-term traders may also be locking in gains after SpaceX moved back above its IPO price.

Earnings beat supports longer-term outlook

SpaceX's recent rebound was also supported by its first earnings report as a public company.

The rocket and AI company reported second-quarter revenue of $7.81 billion, above the $6.93 billion expected by analysts.

Chief Financial Officer Bret Johnsen said during the earnings call that SpaceX is on pace to reach $100 billion in annualized recurring revenue by the end of the year.

Deutsche Bank analysts said Monday that the target is "likely very achievable."

The analysts said SpaceX's second-quarter run rate was about $31 billion, but expect the company to reach its $100 billion target primarily through contributions from its neocloud business and its acquisition of AI coding company Cursor.

Citi analysts also raised their 2026 and 2027 forecasts after incorporating the sources of SpaceX's second-quarter earnings beat.

The analysts reiterated their Buy rating while maintaining a $200 price target.

Morgan Stanley sees AI upside

Morgan Stanley sees significant potential for SpaceX's artificial intelligence business to increase the company's value.

"As investors see more breadcrumbs on the Cursor/Grok story, we see potential for the implied valuation discount on SpaceX’s AI business to lift, driving potentially substantial appreciation of the stock," analyst Adam Jonas wrote in a report to clients.

He added that few investors currently appear bullish on SpaceX's AI business beyond its neocloud operations, creating what he described as an upside-skewed catalyst path at current levels.

Morgan Stanley maintained its Overweight rating and $300 price target on SpaceX shares.

SpaceX agreed to acquire Cursor for $60 billion in stock shortly after its June IPO.

The transaction is intended to strengthen the company's AI business following its merger with xAI earlier this year.

Morgan Stanley said more than 60% of Fortune 500 companies and 50,000 enterprises use Cursor's coding tool.