After a strong initial start after its IPO, Space Exploration Technologies (SPCX 2.24%) stock, also known as just SpaceX, has given up some gains in recent trading days. On Monday, the stock fell below $170 as it's been a volatile ride of late.
But with tremendous long-term growth opportunities in space, artificial intelligence (AI), and telecom, could this be a great growth stock to buy while it trades below $200?
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Is SpaceX the ultimate long-term play?
Based on SpaceX's estimated total addressable market of $28.5 trillion, it could make for an enticing long-term investment. If the company can one day transport humans to Mars, as it hopes to do, its valuation could indeed be much higher than it is now (around $2.3 trillion).
From this perspective, the stock may be a worthwhile investment, but only if you're a believer in CEO Elon Musk and his grand visions for the company's future. It requires a leap of faith, given how lofty the goals are and the company's significant losses, which are in the billions. They're also likely to get deeper as SpaceX invests more heavily in AI and other ventures. It'll inevitably be a bumpy ride, but if it's successful, there will no doubt be considerable upside for the stock in the future.
NASDAQ: SPCX
Key Data Points
SpaceX stock may be trading lower, but it's by no means a cheap investment
Although SpaceX's stock is down from its high of more than $225, it arguably shouldn't have been above even $200 to begin with. Even at around $170 and a market cap of $2.3 trillion, its valuation is incredibly high for a business with so many question marks and whose financials are simply not all that impressive.
This is a company that generated just under $19 billion in revenue last year, which means you'd be paying a price-to-sales multiple of well over 100. Meanwhile, with a lack of profitability and significant cash flow needs, the risk of future stock offerings and dilution is going to be high; there could be considerable room for the stock to fall further in the months and years ahead.
Given the stock's inevitable volatility, the best option for investors may be to hold off for the time being, at least until there's a drastic improvement in both SpaceX's financials and valuation. Without that, you'll be taking on significant risk with the stock.
