A few weeks ago, Space Exploration Technologies (SPCX -2.51%) was the most hyped stock on the market. Now it has quietly slipped below its $135 offering price, trading around $124 and down roughly 45% from its post-debut high near $226. For most investors, that kind of round trip is a warning. For contrarians, who like to buy what everyone else is fleeing, it is an invitation to take a closer look.
NASDAQ: SPCX
Key Data Points
The slide has more to do with the mechanics of hype than with anything broken inside the business. SpaceX popped on its debut, then got swept into a major stock index, which forced index funds to buy the shares. Once that mechanical demand was satisfied, the buying dried up, momentum reversed, and the stock drifted back below where it started. A scrubbed Starship test flight added to the gloom. In other words, the froth came out, but the company that raised the money is the same one it was a month ago.
Image source: Getty Images.
The contrarian case for SpaceX
Here is what draws me to the setup. The engine underneath SpaceX, its Starlink satellite-internet service, keeps growing and now serves more than 10 million customers, and the company has started raising prices, a sign the product has become hard to live without. Layer on optionality like direct-to-phone connectivity and the long-term Starship program, and you have a business still expanding even as the stock sinks.
Wall Street has not soured either. Deutsche Bank, for one, launched coverage with a buy rating and a $255 target, well above today's price. When a dominant franchise trades below its debut on sentiment rather than fundamentals, patient buyers are sometimes rewarded.
The catch worth naming
I would not confuse "below the IPO price" with "cheap," though. Even after the drop, SpaceX carries a market value of $1.64 trillion, which works out to more than 84 times its sales, an extraordinary premium for any company. Starship, the linchpin of its future ambitions, has a long history of delays and setbacks, and the whole story leans heavily on Starlink continuing to execute. This is a high-conviction, high-volatility holding, not a value bargain.
So is SpaceX a contrarian buy worth considering? For investors who believe in the long-term build-out of space-based connectivity and can stomach real volatility, the recent weakness makes the stock more interesting than it was at its peak, not less.
I would treat it as a small, speculative position rather than a table-pounding bargain, because the valuation still demands a lot. But buying a great business when the crowd has lost interest is how contrarians have always made their best returns. SpaceX is a name that finally deserves a spot on the watch list.
