Elon Musk's Space Exploration Technologies (SPCX -0.59%) went public on June 12. In the days that followed, the stock quickly rallied to a peak of $225.64, but it has since plummeted to as low as $104.83. As of Monday afternoon, it was trading around $146 -- still down by 35% from its peak, and below its first-day opening price.
SpaceX could create significant long-term value for investors through its space transportation, satellite internet connectivity, and artificial intelligence (AI) infrastructure businesses -- in fact, Musk thinks $1 trillion in annual revenue might be in the cards by 2030. But the stock's sky-high valuation might be a barrier to further upside in the near term. Here's where I predict its stock will be trading one year from now.
Image source: The Motley Fool.
SpaceX has an incredible long-term opportunity
No company has ever generated $1 trillion in annual revenue, but although Musk's forecast sounds ambitious, SpaceX might have a whopping $28.5 trillion total opportunity to capture across its three core businesses.
First is space transportation, which currently has a $370 billion addressable market. SpaceX's Falcon 9 and Falcon Heavy reusable rockets launch around 2,500 tons worth of commercial payloads into orbit per year on behalf of other businesses, representing a 90% global market share. But the company believes that number could grow to 10 million tons per year in the future as businesses race to send advanced satellites and even AI infrastructure into space.
Then there is the connectivity business, which presents SpaceX with a $1.6 trillion opportunity. The company has launched over 10,200 of its own Starlink satellites into orbit, where they provide broadband internet access to 12 million paying customers here on Earth. Later this year, it will start launching its new V3 satellites, which have 10 times the bandwidth of the current V2 generation. They will travel on the new Starship reusable rocket, which will have a record payload capacity, allowing it to carry far more satellites into orbit per trip.
But SpaceX believes its biggest opportunity is in AI, which presents a $26.5 trillion addressable market across infrastructure, consumer subscriptions, and enterprise applications. The company acquired another Musk-owned company, xAI, earlier this year, along with a series of data centers, including Colossus and Colossus II. The infrastructure aspect of the AI opportunity is compelling, as SpaceX has already signed several deals to rent computing capacity to other businesses, including Anthropic, Alphabet, and Reflection AI.
SpaceX now wants to deploy solar-powered AI infrastructure in space, where it doesn't need complex cooling systems or expensive energy solutions. Its new Starmind satellite uses a variant of Nvidia's Vera Rubin systems and will beam data back to Earth via the existing Starlink network. Having the distribution infrastructure already in place puts SpaceX light-years ahead of any competitor trying to enter this area of the AI market.
Upside might be limited for SpaceX investors over the next year
SpaceX's business is growing rapidly. The company generated $7.8 billion in revenue during the second quarter, a whopping 92% increase from the year-ago period. The connectivity business was the largest contributor, bringing in $4.3 billion, while the AI business grew the fastest, with revenue soaring 247% to $2.6 billion.
Chief Financial Officer Bret Johnsen thinks the AI business could reach an annual revenue run rate of $100 billion by the end of 2026, such is the incredible demand for computing capacity from AI developers.
NASDAQ: SPCX
Key Data Points
But right now, SpaceX's trailing-12-month revenue totals $23 billion across all segments. Based on its market capitalization of $1.9 trillion, its stock trades at a sky-high price-to-sales (P/S) ratio of 83, making it 13 times as expensive as the tech-centric Nasdaq-100 index, which has a P/S ratio of 6.3. Simply put, SpaceX looks wildly overvalued relative to its big-tech peers.
Wall Street doesn't seem convinced that SpaceX's AI business will achieve a $100 billion annual revenue run rate before this year is over, as the average analyst forecast is around $98 billion in total revenue for 2027 (according to Yahoo! Finance).
If we assume that the estimate is accurate, that places the stock at a forward P/S ratio of more than 19. That implies SpaceX stock would have to decline by about 67% over the next 16 months or so just to trade in line with the P/S ratio of the Nasdaq-100.
I'm not predicting that will happen, but I certainly think there is scope for the stock to fall to a price below $100 over the next year -- particularly if the recent jitters in the AI industry result in a tangible drop in infrastructure demand.
As a result, while SpaceX is packed with long-term potential, I think investors might have better opportunities to buy its stock in the future.
