Is It Too Late to Buy SpaceX?

Space Exploration Technologies (NASDAQ: SPCX) has offered investors what may be one of the most exciting moments of the year. The company, more commonly known as SpaceX, completed a record initial public offering, raising $75 billion, then went on to gain 40% from its opening price over a period of three days.

SpaceX stock reached more than $211 at its highest before giving back some gains, and the company's market value as of June 18 surpassed $2.5 trillion. In fact, the company's market capitalization, at the trillion-dollar level, puts it in the league of many well-established tech companies such as Nvidia and Microsoft.

Now, if you haven't yet bought SpaceX stock, you might be wondering: Is it too late to invest? Let's find out.

Image source: Getty Images.

The biggest IPO ever

We'll start by taking a general look at how the IPO unfolded and then a closer look at the SpaceX business. As mentioned, SpaceX completed the largest IPO on record -- and then, after underwriters exercised an overallotment option, raised even more, putting the total at $85.7 billion.

SpaceX set a fixed price of $135 for IPO shares, the stock then opened at $150, and it went on to soar from that level. Retail investors have rushed to get in on SpaceX with the idea that it may be one of the next big tech winners. Many also have invested as a bet on Elon Musk, who leads the company. Musk, who also is CEO of Tesla, has surprised investors by reaching what earlier seemed like impossible dreams -- from developing autonomous vehicle technology to launching robotaxis.

Today, Musk's goals of putting data centers in space and sending humans and cargo to Mars may seem difficult to reach -- but if he does attain them, they could result in mind-boggling growth for the company.

SpaceX's name might prompt you to think about rocket launches, and this is indeed a big part of the business -- but the company also has two other units, focused on satellite-based connectivity and artificial intelligence (AI). For now, the connectivity business, Starlink, is the revenue driver. Thanks to its growth, offering services to internet users around the world, Starlink contributed $11.4 billion to revenue last year -- that's on the company's total $18 billion in revenue.

A huge investment to support goals

The AI business, though promising, is the biggest drag on earnings today as it involves huge investment to support future goals. SpaceX's capital expenditures of $12 billion on that business last year were higher than the $3 billion and $4 billion in capex for the space and Starlink units, respectively. And that brought the company to a net loss of $4.9 billion.

Musk has said SpaceX is entering a massive growth phase. This is great, but it also suggests high investment and risk may be ahead. SpaceX's goals aren't the sort that are reached overnight, so investors must be patient and prepared to wait a number of years as this story unfolds. That's fine because, in investing, you're most likely to win if you hold onto quality stocks for at least five years. This offers you time to benefit from the full growth story -- and potentially recover after any difficult periods.

Now, let's consider whether SpaceX is a buy right now -- or if it's too late to get in after the stock's early gains. I say it may be too early to buy, particularly if you're uncomfortable with risk. If you're a cautious investor, it's best to remain on the sidelines at least until you've seen a few more earnings reports from SpaceX. It will be important to consider capex in relation to the levels of revenue growth -- if revenue shows strong positive momentum and the company makes progress toward certain goals, you might consider getting involved.

If you're an aggressive investor, though, you may feel comfortable picking up a few shares earlier, but I wouldn't rush to invest at these levels. Morningstar's fair value estimate for the stock is $62, suggesting it may be greatly overvalued. So the best idea may be to keep the stock on your watch list for now and buy on an eventual dip.

Adria Cimino has positions in Tesla. The Motley Fool has positions in and recommends Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.