The share price of the Scottish Mortgage Investment Trust (LSE: SMT) has shown remarkable growth over the past year, sparking interest among investors about its potential trajectory by 2026. The trust’s market value, which reflects the share price, is influenced by supply and demand as well as the valuation of its underlying holdings, assessed through the Net Asset Value (NAV).
Investors should note that Scottish Mortgage diversifies its investments across both publicly traded stocks and privately held companies. This complexity can make the NAV harder to define. Historically, the trust has often traded below its NAV, a trend attributed to the fallout from the 2021 decline in growth stocks, which represent a significant portion of Scottish Mortgage’s portfolio. Furthermore, UK-listed companies and investment trusts typically do not maintain fair market valuations, which has contributed to this discount.
Performance Drivers and Key Holdings
Scottish Mortgage boasts a diverse array of investments, with notable strengths in the technology sector. Hardware investments, particularly in Nvidia and TSMC, have significantly outperformed software holdings like Spotify. However, the standout investment remains SpaceX, which constitutes 15.2% of the trust’s overall portfolio. This investment has a substantial influence on the NAV, as the second-largest holding is only 5.3%.
The company’s valuation has skyrocketed in recent funding rounds, positioning it for a potential initial public offering (IPO) later this year that could value SpaceX at up to $1.5 trillion. In contrast, the current valuation used to calculate Scottish Mortgage’s NAV is likely around $800 billion. The anticipated IPO could significantly elevate the trust’s valuation, potentially propelling its share price higher.
Future Outlook and Risks
Predicting the future share price of Scottish Mortgage is inherently uncertain. Yet, many analysts believe that the performance of SpaceX will drive upward momentum, even if other investments underperform. Some forecasts suggest that SpaceX could rival Nvidia as the world’s most valuable company by the 2030s, with its share of the Scottish Mortgage portfolio possibly increasing to 30% as its potential is realized.
In addition to the IPO, SpaceX plans to launch its Starship mission to Mars this year. A successful landing and the debut of the Tesla humanoid robot could further enhance its valuation. Despite these promising factors, investors should remain cautious. The trust employs leverage to amplify its investments, which can magnify both gains and losses, especially during market downturns.
Despite these risks, optimism remains for Scottish Mortgage’s future. Analysts predict it could trade at least 15% higher by the end of this year, largely due to improvements in SpaceX’s valuation. As the market evolves, investors should closely monitor these developments to make informed decisions regarding their investments in the trust.
The potential for Scottish Mortgage Investment Trust is noteworthy, and it remains an attractive option for investors looking to capitalize on the growth of innovative companies like SpaceX.
