This article was updated on April 5, 2017, and originally published on Sept. 21, 2014.
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 two of the 21st century's hottest enterprises: electric-car maker Tesla (NASDAQ: TSLA) (which now owns solar panel lessor SolarCity), and space launch company SpaceX. Tesla isn't profitable, though. Neither is SpaceX -- although in its defense, SpaceX has reported profits in the past, and may do so again in the future.
Unfortunately, you can't own it. So far, Musk is keeping SpaceX private. Of his two most famous companies, SpaceX is the only one with any record of making money... and the only one that has never 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?
Prior to its big stock sale to Google and Fidelity in 2015, the most recent known sale of SpaceX equity had 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, and add in both the original $100 million initial investment from Elon Musk himself, and the most recent 2015 investment of $1 billion by Google and Fidelity, and we presume that SpaceX its stock is worth at least the $1.345 billion put into it by its investors.
In fact, SpaceX stock is probably worth quite a bit more than that. Figuring out how much more, though, is tricky.
Crunching the numbers
SpaceX "declines to disclose" its annual revenue or profits -- at least officially. But in January 2017, The Wall Street Journal came into possession of a treasure trove of internal documents from SpaceX, detailing its financial condition up through about mid-2015. Revealed there was the fact that SpaceX's best revenue year to date came in 2014, when the company booked roughly $1 billion in revenue from launching satellites (its main area of business).
Let's assume for a moment that this number is both accurate, and repeatable at some time in the future, now that SpaceX appears to have its launch operations back on track. Rival space launch companies Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT) sell for market capitalizations of 1.1 and 1.6 times annual sales, respectively. So if we split the difference and apply, say, a 1.35 times sales valuation to SpaceX, the stock could be worth approximately $1.35 billion today.
Crunching more numbers
SpaceX also boasts a backlog of "over 70 launches on its manifest, representing over $10 billion in contracts" to be performed for its customers, launching satellites into outer space, ferrying supplies to the International Space Station, and soon, transporting astronauts to ISS as well. To compare, at last report, S&P Global Market Intelligence pegged Boeing's backlog at $473.5 billion, while Lockheed Martin had a backlog of $96.2 billion.
Now, with a market capitalization of $108.7 billion, investors are valuing Boeing at about 23% of the value of its backlogged work. If we apply a similar valuation "price-to-backlog" ratio to SpaceX, the company might be worth as little as $2.3 billion.
But now look at Lockheed: At a $78.1 billion market cap, investors think Lockheed Martin is worth roughly 81% of its backlog. Apply this valuation to SpaceX's $10 billion backlog, and presto-change-o, SpaceX stock's implied value leaps as high as $8.1 billion.
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 2015, when Google -- now Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) -- blew all preceding valuation guesses out of the water. As part of a group of investors participating in a $1 billion round of funding, it 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: Maybe Google loves Elon Musk. Maybe they think the guy's simply magic.
After all, Musk's one company that he both brought and kept public, Tesla, sells for a valuation of more than 7 times annual sales. And this is the one that has never earned an annual profit. So how much more valuable will SpaceX stock become when it IPOs? Fast-growing, space tech-sexy, and maybe once again profitable SpaceX stock?
If you ask Google, the answer seems to be: "A lot."
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rich Smith owns shares of Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Tesla. The Motley Fool has a disclosure policy.