If SpaceX were a publicly traded company, there would definitely be a debate over whether it's more of a space stock (because of its many Starlink commercial rocket launches) or a defense stock (for its heavy reliance on national security missions for additional revenue). There's one thing I think every investor would agree on, though:
SpaceX would definitely be a growth stock.
Image source: Getty Images.
SpaceX the defense growth company
Consider, for example, this latest news about growth in SpaceX's "Starshield" partnership with the U.S. military.
It has been only 15 months since SpaceX even first mentioned having a service called "Starshield" -- described at the time as a "secured satellite network for government entities" that might also offer some "Earth observation" capability. Less than a year later, SpaceX booked its first Starshield contract, a modest $70 million pilot project with the U.S. Space Force.
Fast-forward six more months to March, when Reuters broke the story that Starshield's relationship with the U.S. government actually began sooner -- and is already far bigger -- than anyone had guessed. As the news agency reports, back in 2021, SpaceX signed a secret contract with the always-reticent National Reconnaissance Office (NRO).
That agreement was for SpaceX to build the NRO a fleet of spy satellites worth $1.8 billion.
$1.8 billion for SpaceX Starshield
Reuters describes the new program as encompassing "vast, low-Earth orbiting satellite systems aimed at supporting ground forces [by] quickly spot[ting] potential targets almost anywhere on the globe."
How vast is vast? Well... probably pretty vast. The cost of a single Starlink satellite has been estimated at $500,000. Assuming Starshield satellites, which grew out of the Starlink program, have a similar cost, $1.8 billion might suffice to buy as many as 3,600 of them. Even adding $3 million per satellite for the cost of space launches -- say, $69 million for a Falcon 9 rocket carrying the satellites up 23 at a time -- would still permit the NRO to commission and launch well in excess of 500 SpaceX spy satellites.
That's apparently vast enough to worry Russia. In a follow-up story Wednesday, Reuters quoted Russian Foreign Ministry spokeswoman Maria Zakharova criticizing the Pentagon's "military space ambitions" and threatening "retaliatory measures" against Starshield.
The problem with that, however, is precisely the problem that small, disposable satellites like Starlink and Starshield are designed to solve. It's well known, for example, that Russia, China, North Korea, and others are developing anti-satellite weapons (ASATs) to destroy U.S. satellite capability in times of conflict. The problem, though, is that this is much easier said than done -- and much easier done when there are only a relative handful of satellites in orbit that those rival nations are specifically worried about. The genius of Starlink and Starshield is that they feature (or will feature) literally thousands of small satellites, making destroying all of them with ASATs unrealistic.
Thus, it's not just SpaceX's technological prowess, but also its manufacturing scale and its ability to build and deploy thousands of satellites to orbit in just a few years' time that makes the company invaluable to the Pentagon as a military contractor.
Why investors should care about SpaceX
In the event of a SpaceX IPO, or even an IPO of just Starlink and Starshield, those qualities would make SpaceX pretty valuable to investors, too.
Consider that the most up-to-date Payload Research estimate of SpaceX's 2024 revenues credits SpaceX with only $55 million in revenue from Starshield. That's a fair assumption for what the company's published $70 million Starshield contract might generate in its first year. But it doesn't count the revenue SpaceX could generate from this just-revealed $1.8 billion NRO contract.
SpaceX says it already is capable of building 55 Starlink/Starshield satellites per week, and can launch as many as 200 per month. Given these production and deployment rates, it's entirely feasible to think SpaceX could fulfill its $1.8 billion NRO contract within just a few months (if the contract is for around 500 satellites), or just a couple of years (if it's for a number on the order of 3,600 satellites). And assuming Starshield satellites, like Starlink satellites, are designed to have useful lives of about five years, after which they're de-orbited and replaced with new ones, this NRO contract could easily turn into a billion-dollar-a-year recurring revenue stream for SpaceX.
Long story short, for investors, the potential of a Starlink IPO -- should one happen -- just got even more attractive.
