The Analysts Are Compromised - by Ed Elson - Prof G Media
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Simply Put Newsletter<br>The Analysts Are Compromised<br>The real reason Wall Street loves SpaceX
Ed Elson<br>Jul 14, 2026
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Twenty-three years ago, a scandal emerged on Wall Street. Henry Blodget, an equity research analyst who’d become well-known for his bullish coverage of some of the world’s hottest internet stocks during the dot-com boom, turned out to be privately bearish. In emails to colleagues Blodget described many of the stocks he’d publicly recommended as “crap,” “dogs,” and “POS.” After the bubble popped and valuations tanked, Blodget was charged with securities fraud, and the SEC banned him from the securities industry for life.<br>Blodget was the posterchild, but he wasn’t alone. At Salomon Smith Barney, another analyst who’d publicly rated one company as a “buy” was discovered to have called that same company a “pig” in private. Another analyst at Lehman Brothers admitted in an email that “ratings and price targets are fairly meaningless anyway,” and that the “little guy” might get misled. “Such is the nature of my business,” he wrote. It was an epidemic: By the year 2000, three-quarters of all stocks carried buy recommendations, and only two percent carried sell recommendations. I don’t need to tell you what happened next.
Share<br>Why would Wall Street analysts recommend stocks they knew to be junk? One word: incentives. Since IPOs and equity offerings are important sources of revenue for investment banks, analysts are incentivized to publish glowing research about companies in order to win deals and generate fees. This conflict of interest was summarized well by a Merrill Lynch employee in 2002, who lamented to a colleague that “John and Mary Smith are losing their retirement because we don’t want [an investment banking client] to be mad at us.”<br>After the bubble popped, the SEC realized it’d better do something about this. So they came up with the 2003 Global Research Analyst Settlement. The goal was to neutralize the conflict of interest posed by investment bankers and equity research analysts playing for the same team. So, they separated the two divisions entirely: Equity research was no longer allowed to talk to investment banking (without a compliance chaperone present), and compensation for each group was divorced from one another as well. That way, the investment bankers could keep doing their job (winning deals), and the analysts could publish unbiased research.<br>Why am I talking about this?<br>Déjà Vu
Last week, the Wall Street banks revealed their equity research for SpaceX, and the price targets were nothing short of insane. Before we discuss them, keep in mind SpaceX is already worth $1.8 trillion. With only $19 billion in 2025 revenue, that’s at least a trillion dollars too high. (I explain why here.) OK, now let’s look at what Wall Street “believes.”<br>According to JPMorgan, SpaceX is worth $2.9 trillion. That’s 58% higher than its current valuation. Their opinion is that SpaceX’s “potential impact on humanity” is “bigger than any company’s” they’ve “ever seen.” Deutsche Bank says the company is even more valuable: $3.3 trillion. In their view, the rocket-maker represents the “apex of civilisational ambition.” Over at Morgan Stanley, the number’s even higher: $3.9 trillion. MS says SpaceX is the “final frontier” of AI. But the price target that takes the cake belongs to lesser-known investment bank Raymond James, whose lead analyst says SpaceX is worth — wait for it — $10.4 trillion. That would make SpaceX more valuable than Microsoft, Amazon, Meta, Tesla, and Berkshire Hathaway … combined.
I have one question: WTF? I had to read the Raymond James report a second time just to make sure I wasn’t hallucinating. (I wasn’t.) Their “models” project SpaceX revenue will rise from $19 billion to more than $5 trillion by 2035. (That’s nearly a fifth of America’s GDP.) Ninety-four percent of that revenue will supposedly come from AI, which means the company’s AI business must become 23 times larger than Nvidia’s, despite currently being 67 times smaller. As I said a few weeks ago: Pass me the crack pipe.<br>Conflicted
These price targets are ridiculous — so ridiculous as to be inexplicable. That is until you realize the one thing that unites them all: They were all published by banks that underwrote the SpaceX IPO. Yes, Raymond James, Morgan Stanley, JPMorgan … they all participated. In fact, there is not one bank that underwrote SpaceX’s go-public and didn’t recommend the stock as a buy.
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I know what you’re thinking: If the IPO already happened and the banks already collected their fees, what’s the incentive to publish flattering research now? Answer: More fees. SpaceX has already initiated a follow-on debt offering, and it’s estimated that the company will have to raise $235 billion over the next four years just to cover its costs. That translates to tens of billions of dollars in future investment...