How Morgan Stanley’s ‘mad scientist’ became the top Wall Street analyst on the space industry

Morgan Stanley headquarters in Times Square, New York.

Source: Morgan Stanley
Morgan Stanley headquarters in Times Square, New York.

Adam Jonas became famous – and to some, infamous – on Wall Street when he called for Tesla’s stock to more than double to $70 a share.

He made that call in 2011 as Morgan Stanley’s auto analyst, saying Tesla was set to “shake-up” the “complacent” auto industry. He continued to follow up with bullish price target increases as the electric automaker’s shares rose. While Tesla has been a volatile stock in the years since, it now trades at around $350 a share.

The prediction earned Jonas a reputation inside Morgan Stanley as “kind of a mad scientist,” he said in a recent interview. Now he’s doing it again – but with the space industry.

His interest in Tesla naturally led him to SpaceX, Elon Musk’s other ambitious transportation venture, which Jonas believes is bound to affect the future of the electric car maker. SpaceX is getting into broadband technologies at the same time the auto industry and Tesla are pushing into advanced technologies like autonomous driving.

“We didn’t start out one day thinking ‘hey, let’s do space,’ necessarily,” Jonas said. While visiting Tesla in 2010, Jonas stopped by SpaceX. After that, Jonas started gathering other Morgan Stanley analysts to help him research the space industry.

His early efforts may be about to pay off. This year has been “very, very active in terms of capital formation and then technological advancement” in the space industry, he said. And Morgan Stanley has been talking to many of the new space companies, including: OneWeb, Rocket Lab, Vector, FireFly Aerospace, Spaceflight Industries, Planet Labs, Spire Global, BridgeSat and NanoRacks – to name a few.

‘Auto boy’ discovers space

Jonas told CNBC “they called me auto boy” when he joined the Wall Street firm. Raised in the Rust Belt of northern Ohio, Jonas says he was surrounded by auto industry: His uncles worked at car businesses, his classes at the University of Michigan were taught be retired auto executives, and his first job at brokerage Dean Witter focused on industrial clients in Chicago.

Jonas shifted into equity research after Dean Witter was acquired by Morgan Stanley in the late 1990s and spent a dozen years in London as a European auto analyst.

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His more recent shift to space came after “[We started] realizing there’s a hell of a lot going on,” Jonas said. But there was an early disconnect: Investors didn’t seem to care. Jonas said he and the firm’s space team were looking at “dozens and dozens of companies” but when they talk to the bank’s clients about it “they giggle.'”

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Jonas wanted to dive deeper. Higher-ups at Morgan Stanley were “open-minded but needed to be sold on the idea” of putting time and resources behind assembling a team of space analysts, Jonas said. He paired up with Armintas Sinkevicius, who has a background in telecommunications.

Sinkevicius remembers “the constant delays” and, in some cases, bankruptcies of satellite communication and broadband networks over the last 20 years. And that experience is a good foil to Jonas.

“Adam is the much more exciting storyteller and I’m the much more dry, sort of ‘in the numbers’ person,” Sinkevicius told CNBC. “I played more of the role of reeling Adam in a bit and saying, ‘you know, there’s a lot of people that have scars from things like Iridium and Teledesic and Globalstar.'”

The Elon Musk connection: Tesla to SpaceX

“Our work on Tesla brought us into the Elon Musk sphere,” Jonas said.

Morgan Stanley’s autos team was “very early and quite aggressive” in researching how autonomous technologies could change the auto industry, Jonas said. But six years ago, before nearly every major tech company and automaker was pouring billions of dollars into the field, Jonas said Morgan Stanley’s “clients didn’t care” about autonomous.

“They said it’s a science project and there’s nothing in the market to play,” Jonas said. That has changed, and now the space industry is poised for similar growth, Jonas believes.

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Musk’s many projects, notably SpaceX, fueled Morgan Stanley’s interest in the space industry, for several reasons.

“First, we think that the future of SpaceX will affect the future of Tesla,” Jonas said. “A potential combination of Tesla and SpaceX is something we’ve written about many, many times.”

“[Second,] SpaceX is getting into broadband” satellite technologies, Jonas said.

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SpaceX is currently testing its first two of more than 4,425 small satellites for the planned Starlink network. The plan puts SpaceX on a collision course with the world’s biggest telecom and satellite manufacturing companies, as Starlink aims to cheaply offer broadband speeds comparable to fiber optic networks. This could quintuple SpaceX’s valuation, as the network would be able to provide bandwidth to under-served, and even unserved, parts of the globe.

Morgan Stanley has not met with SpaceX since Jonas has been publishing near-monthly notes about space, he said. “That’s not because we haven’t tried,” Jonas added.

Deploying Morgan Stanley resources for space

Jonas emphasized the collaborative nature of Morgan Stanley’s space team, which is made up of 11 analysts covering sectors from aerospace to the internet. As the the firm speaks to different company boards, Jonas said the team has found that space has been one of the industries “deeply important to various members” of companies such as Alphabet, Facebook, Amazon and Honeywell.

Along with the firm’s October 2017 report, Morgan Stanley released a “Space 20” list of stocks best poised to benefit from exponential growth in the space industry.