Space Exploration Technologies Corp (SPCX +0.43%), which also goes by SpaceX, reports its latest earnings numbers on Aug. 4, and the lockup period for insiders begins to expire soon afterward. While the stock has been in a tailspin in recent weeks, I believe it's destined to fall even lower.
The market has been increasingly bearish on the stock due to its heightened valuation. Not only will expectations be high for the business to produce a solid quarter because of its high price tag, but there may also be an incentive for insiders to sell the stock while it's as high as it is.
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Investors may soon have more reasons to dump the stock
When SpaceX went public, investors seemed willing to buy the stock at almost any price, regardless of how obscene it was. But over time, as investors have come to realize the risk it possesses and perhaps pay more attention to its lack of profitability and need for cash, the appetite has cooled significantly. Investors who missed out on the IPO can now buy it below its IPO price of $135, and even that isn't luring them in.
Next week, on Aug. 4, when SpaceX reports its first earnings report, the spotlight will be on its growth and earnings, which many investors may have glossed over amid the excitement around the IPO. If SpaceX doesn't show significant improvement, which I don't expect to be the case, that could trigger a deeper sell-off. Plus, insiders will also be able to begin offloading some of their shares a few days later. That extra supply hitting the market may push the share price down even further and raise concerns about how much confidence insiders have in the business (if there's a flurry of selling).
NASDAQ: SPCX
Key Data Points
SpaceX still looks incredibly overvalued
It's remarkable just how volatile SpaceX has been in such a short period. When it first went public, its valuation rose quickly, reaching far above $2 trillion in market cap and rivaling some of the biggest tech giants in the world. And now, its share price is down around 50% from its highs.
And yet, despite its market cap being less than $1.5 trillion today, SpaceX remains grossly overvalued given its lack of profitability and significant cash burn. It isn't a business that even looks to be worth $1 trillion. Next week, as there's more focus on its earnings, there could be another big wave of selling.
