SpaceX Stock Is Almost Here. Could a $1,000 Investment Make You a Millionaire?

The SpaceX (NASDAQ: SPCX) initial public offering (IPO) is imminent. Assuming nothing changes in the meantime, the well-discussed stock will begin public trading on Friday, June 12. Even if you aren't able to directly participate in the initial direct placement, you may have plans to buy it in the open market afterward.

And the hype is certainly palpable enough to make you feel like it's a must-have investment. Indeed, you may even believe a relatively small investment now could grow into a major sum of money later.

And this raises the question -- could investing just $1,000 in SpaceX this week make you a millionaire?

Image source: Getty Images.

The extreme optimism makes sense...

Given the way most of the crowd -- individuals and institutions alike -- are talking about it, it may not seem like SpaceX has a ceiling. And understandably so. See, the company isn't just rockets. It's also satellite-based internet service provider Starlink, which is technically its biggest business right now, serving 10.3 million subscribers. It's an artificial intelligence (AI) data center owner/operator as well, and the developer of its own AI chatbot (Grok). It's even working on its own high-performance processing chips. These are all markets worth billions of dollars per year, and likely en route to collectively being worth trillions.

Of course, Elon Musk is cleverly combining them into something game-changing, like putting data centers in orbit around the planet.

The likelihood of a $1,000 investment in this company turning into a seven-figure sum in a single lifetime, however, is still minimal.

...but the necessary math isn't quite jibing

Don't misunderstand. Given enough time, SpaceX could turn into a sizable winner.

If you crunch the numbers of what it would take to turn $1,000 into $1 million, however, that target quickly moves out of reach. For perspective, assuming you've got 30 years to do it, you would need to earn an average annual (compounded) return of nearly 26% to turn a $1,000 position in SPCX into a million dollars.

Sure, it's happened before. A $1,000 investment in Amazon at its 1997 IPO, for instance, would be worth more than $3 million today. Just be realistic. Amazon was arguably undervalued at its IPO because it was still relatively unknown. (Remember, that was before the dot-com mania; the company also rode the rapid proliferation of the internet.)

SpaceX doesn't have such an advantage. Practically everyone knows about -- and is bullish on -- it, pumping up its valuation to a steep premium. The company's implied valuation of $1.77 trillion? That's more than 90 times last year's total revenue, versus the S&P 500's trailing price-to-sales ratio of less than 4. It's going to take some incredible growth for SpaceX's stock just to justify its starting price. It's going to take nothing less than amazing growth to justify a price that's 1,000 times bigger than its public offering price of $135 per share.

The point is, just be realistic. The odds of a small trade in SpaceX essentially turning into a winning lottery ticket are pretty low. If you're looking to become a millionaire, you'll still want to take the old-fashioned approach. That's investing in quality stocks over and over again whenever you've got the cash to do so.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.