This article was updated on Aug. 17, 2015.
SpaceX just might be the hottest stock that everyone wants to own but no one can buy.
PayPal co-founder and serial high-tech entrepreneur Elon Musk is juggling leadership roles at three of the 21st century's hottest enterprises: electric-car maker Tesla (NASDAQ:TSLA), solar panel lessor SolarCity (NASDAQ:SCTY), and space launch company SpaceX. Over the past 12 months, SolarCity has incurred $28 million in losses, and Tesla lost 18 times that. SpaceX, in contrast, is said to be both profitable on a generally accepted accounting principles basis, and cash flow positive to boot.
Unfortunately, you can't own it. So far, Musk is keeping SpaceX private. Of his three companies, SpaceX is the only one that's making money... and the only one that has not IPO'ed.
But what if it did?
The good news for investors is that for one reason or another, companies -- even profitable, popular companies like SpaceX, which probably don't really need to -- very often eventually go public. One day, we might all have a chance to own a piece of SpaceX. But if and when that day arrives, how much should we pay for this stock?
Up until this year, the most recent known sale of SpaceX equity occurred in November 2010, when the company raised $50.6 million in capital from an equity offering. This offering followed a March 2009 offering of $60 million worth of SpaceX equity.
Prior to that, the company raised $29 million in August 2008, $30 million in March 2007, $50 million in March 2005, and $10.1 million and $15 million in August and December 2002, respectively. Tally it all up, plus an additional $100 million initial investment from Elon Musk himself, and we can assume that, because SpaceX is known to be profitable, its stock is worth at least $345 million.
In fact, SpaceX stock is probably worth quite a bit more than that. Figuring out how much more, though, is tricky.
Crunching the numbers
As of last summer, SpaceX had generated more than $4 billion in revenue. SpaceX "declines to disclose" its exact annual revenue number. But private companies-researcher "PrivCo" recently estimated SpaceX's likely 2014 revenues at just over $800 million.
What's more, SpaceX's own website seems to imply closer to $1 billion in annual sales. (In a jobs ad for "corporate operations," SpaceX describes itself as a "nearly $5 billion revenue operation" today. A move from $4 billion in total revenues last summer to $5 billion today suggests SpaceX is now generating roughly $1 billion in annual revenue.)
Rival space launch companies Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT) sell for market capitalizations of 1.0 to 1.4 times annual sales. So if we apply, say, a 1.2 times sales valuation to SpaceX, the stock should be worth at least $1.2 billion today.
Crunching more numbers
SpaceX also boasts a backlog of $7 billion worth of contracts to be performed for its customers, launching satellites into outer space, and ferrying supplies to the International Space Station. That's more money than SpaceX ever made in its past 12 years. To compare, at last report, S&P Capital IQ pegged Boeing's backlog at $488.8 billion, while Lockheed Martin had a backlog of $80.5 billion.
Now, with a market capitalization of $98 billion, investors are valuing Boeing at about 20% of the value of its backlogged work. At a $66 billion market cap, investors think Lockheed Martin is worth roughly 82% of its backlog. If we apply similar valuations to SpaceX's $7 billion backlog, the stock should be worth anywhere from $1.4 billion (at Boeing's "price-to-backlog" ratio) to perhaps as much as $5.7 billion (at Lockheed's price-to-backlog ratio).
Elon Musk's magic multiple
So you see: The more valuation calculations we throw at SpaceX, the higher the valuation seems to march. We saw this again in January, when Google (NASDAQ:GOOGL) (NASDAQ:GOOG) -- soon to be called "Alphabet" -- blew all preceding valuation guesses out of the water. As part of a group of investors participating in a $1 billion round of funding, Google anted up $900 million for a 7.5% stake in SpaceX stock. This means that SpaceX stock is now worth $12 billion in market capitalization. At least, according to Google, it is.
So why would Google pay so much? Here's a thought: Google loves Elon Musk. They think the guy's simply magic.
After all, the two companies that Musk has already brought public, Tesla and SolarCity, both sell for valuations that are truly immense multiples of their respective annual sales. And these are the two Musk companies that are not earning a profit. So how much more valuable will SpaceX stock become when it IPOs? Fast-growing, space tech-sexy, and profitable SpaceX stock?
If you ask Google, the answer seems to be: "A lot."
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Rich Smith does not own stock in SpaceX (but wishes he could). He has no position in any other stocks mentioned above, either. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 335 out of more than 75,000 rated members.
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