Space Exploration Technologies (SPCX -6.70%) went public last month, and out of the gate, it was red hot, rising to nearly $226 -- a big increase from the $150 it opened at on its first trading day. Since then, however, the stock, which more commonly goes by just SpaceX, has been falling, and on Tuesday it was back to around the $150 mark again.
The stock has effectively given back those early gains, virtually assuring that just about anyone who bought in those early days is in the red. Has the excitement already faded for the stock, and could it be headed for more of a decline, or is now a good opportunity to buy SpaceX?
Image source: Getty Images.
Trading volumes have come down significantly
There was huge interest in SpaceX when its shares began trading nearly a month ago. The new public offering was eagerly anticipated, and investors were looking for ways to gain exposure to the space company even before its shares began trading, including by investing in stocks that had positions in SpaceX. Trading levels were through the roof, but there's clearly less excitement around the stock these days, as volumes have dropped considerably in the past few weeks.
SPCX Volume data by YCharts
Naturally, there will be a bit of a decline after the initial rush to buy an initial public offering. However, with the decline in both the share price and trading volume, it could very well be an indication that investors are beginning to think a bit more carefully about the stock, particularly since its valuation is astronomical. Although it has come down in price, SpaceX stock still trades at around 110 times its trailing revenue.
NASDAQ: SPCX
Key Data Points
SpaceX stock still isn't worth buying
Many investors were eager to buy SpaceX stock regardless of how obscene and illogical its valuation was when it began trading, and are now facing losses that could grow even bigger as the stock may still have more room to fall. This is, after all, an unprofitable company, and while it has grand visions for travel to Mars and putting data centers into space, those are highly ambitious objectives that may take many years to become reality, assuming the company can come through on them at all.
SpaceX is the only stock that has a $2 trillion valuation or more, and that doesn't have a highly profitable and successful business. That math on its valuation just doesn't work, and investors who buy without taking that into consideration could incur mammoth losses. The stock's decline may just be getting started.
