Is SpaceX Stock Your Ticket to Becoming a Millionaire?

Space Exploration Technologies (NASDAQ: SPCX), popularly known as SpaceX, has set the record for the largest initial public offering (IPO) in history. That's clearly generating plenty of buzz around the stock, and investors of all backgrounds are attracted to it. While the range of those buying the shares may be huge, they all have one question in common: "Can this stock make me a millionaire?"

It's a fair question, and there are some key points you must understand to answer it. So, is it possible for SpaceX to make you a millionaire from a single investment? Let's find out.

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Elon Musk has a history of delivering impressive returns to shareholders

There's one key factor for many investors that is contributing to the notion that SpaceX could be a millionaire-maker stock: Elon Musk. Whether you like him or not doesn't really matter when you look at his track record at Tesla; his success is undeniable.

If you had the foresight to invest in Tesla at its IPO, a $5,000 investment would now be worth over $1 million. That's the kind of success investors want to see out of SpaceX, but is that possible?

Unfortunately, I don't think it is. The major difference between Tesla and SpaceX is the stage at which each went public. For the former, it was a fledgling automaker when it went public, having produced barely over 1,000 vehicles. There were multiple times when the company was on the verge of bankruptcy before becoming the success it is today, and the risk was far greater.

SpaceX is not like that. It's an established company and has three key segments: space, connectivity, and artificial intelligence (AI). All of these business units are producing strong revenue growth, and all but its AI segment are profitable on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis. There's a lot less risk involved in its stock versus Tesla's when they each went public, so the expected returns should also be less.

There's another factor: the market cap, which is the company's total value. When Tesla went public, it was valued at about $2 billion. SpaceX was at more than $2 trillion on its first day as a publicly traded company. That means SpaceX went public at a size 100 times larger, which limits investors' return potential.

If you want SpaceX to make you a millionaire, you likely need $1 million already. While risk tolerance varies among investors, you would be hard-pressed to find anyone recommending putting more than 10% of a portfolio value in a single stock. Should SpaceX even grow tenfold from here (which would result in a huge, nearly $20 trillion company), you would need $100,000 to put in the stock now. If 10% is your limit, then you're already a millionaire.

As a result, SpaceX isn't a millionaire-maker stock like Tesla was. That doesn't mean it will be a bad investment, but just don't expect Tesla-like returns.

Keithen Drury has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.