An unusual derivative play off SpaceX’s IPO success: A maker of space gases
The burgeoning space transportation industry could set up a unique opportunity for Linde , according to Rothschild & Co. Redburn. The investment firm reiterated its buy rating on the industrial gas supplier in a Wednesday note. Analyst Tony Jones raised his price target on shares of Linde to $560 from $550. Shares of Linde have surged 20% this year. Jones’ updated forecast implies the stock could add another 9% from its Tuesday close of $515.59. LIN YTD mountain LIN YTD chart Elon Musk ‘s SpaceX is set to debut on the Nasdaq on Friday. The rocket maker is planning to go public with a valuation of $1.77 trillion, which would make it one of the largest companies in the U.S. But alongside SpaceX, Jones also sees Linde as a potential beneficiary. The analyst noted that Linde has fueled NASA for around 60 years, and now has capital expenditures that are set to ramp alongside Starbase, SpaceX’s headquarters. Jones that the moat for the industrial gas business model is extremely high, in part due to the fact that a “near-perfect distribution track record is essential.” “For space propellant gases, the liquefaction of difficult-to-handle gases and cryogenic distribution is extremely challenging and limits the number of suppliers to an exclusive few. We see space transportation as a nascent opportunity for industrial gas companies,” he wrote. “The company has been supplying NASA for decades, has built commercial relationships with the newer market participants, and an industrial gases distribution platform is in advanced construction very close to SpaceX’s new launch site.” Jones also sees a further demand accelerator in the form of Starship, a launch vehicle currently under development at SpaceX. “The transition to Starship as a dominant vehicle could transform the opportunity, burning c10x the oxygen of a Falcon 9 launch. Linde’s revenue per launch could near $6m by 2028, from under $4m in 2025,” he wrote. “This comes on top of potentially exponential launch cadence.” Jones added that contracts seem likely for Linde, and that the backlog could be revised up, providing another clear valuation and earnings catalyst. Finally, the analyst also applauded Linde’s “rock-solid business with top-quartile management.”
