It's hard to know what to think about Space Exploration Technologies (SPCX -3.04%), aka SpaceX.
First, it had its IPO in June at $135 a share, though it opened its first day of trading at $150. Then, the next few days, it soared to over $225 a share. After that, it plunged to just $108 a share. Now it's back at around $144 a share -- above its IPO price, but still below where it opened. With all these shifts in momentum, it's hard to predict where it might be trading at the end of this year, let alone three to five years down the line.
Investors should be thinking about their stocks as long-term investments, not fixating on day-to-day price moves. So, is SpaceX likely to be a millionaire-maker stock for buy-and-hold investors who pick up shares in now?
Image source: Getty Images.
Growth at a price
SpaceX is almost certain to grow its top line. The big questions are, how much and how fast?
Its Starlink service is growing by leaps and bounds, signing up 1.7 million net new subscribers in the second quarter alone. Its flagship rocket launch service is growing, too... but its expenses are growing nearly as rapidly as its revenue.
The problem for SpaceX is that even if it manages to grow its revenue really fast -- much faster than it ever has, and much faster than anyone not named Elon Musk seems to think is even possible -- its top line would still only be a fraction of what companies with similar market caps take in. And those companies already have positive net incomes. SpaceX would also need to transition from a money-losing operation into a massively profitable one.
| Company | Market Cap | TTM Revenue | TTM Cash from Operations | TTM Net Income |
|---|---|---|---|---|
| Meta Platforms (META +1.20%) | $1.4 trillion | $228.3 billion | $130.3 billion | $68.1 billion |
| Broadcom (AVGO -4.09%) | $1.8 trillion | $75.5 billion | $33.6 billion | $29.3 billion |
| SpaceX | $1.9 trillion | $20.7 billion | $9.9 billion | ($6.4 billion) |
| Taiwan Semiconductor (TSM -0.08%) | $2.1 trillion | $142.8 billion | $88.2 billion | $71.8 billion |
Data source: YCharts. TTM = trailing 12-month.
If that significant and profitable growth doesn't materialize, will investors stick around? They might. Tesla (TSLA +3.48%) investors certainly stuck around through multiple rounds of broken promises from Musk to ultimately triumph when his vision of an independent electric car company became a reality.
But Tesla didn't get a trillion-dollar valuation until it already had a $50 billion revenue stream and positive net income. SpaceX has the valuation without the revenue or the profitability. Should we expect the stock to grow as the business does? Or are years worth of hoped-for growth already baked into the share price?
NASDAQ: SPCX
Key Data Points
Ultimately, it seems unlikely that investors will want to keep their money tied up in SpaceX stock just so they can wait for it to grow into its current valuation, when there are plenty of fast-growing companies with existing revenue lines that are less richly valued. That doesn't bode well for the stock over the long term. While Musk still might pull off another triumph, SpaceX seems unlikely to be a millionaire-maker stock anytime soon.
