Should You Buy SpaceX Stock on the Dip? Here's My Honest Take.
Key Points
SpaceX's share price has pulled back from its post-IPO peak.
The company's underlying business and growth prospects haven't changed, though.
At this point, the recent dip doesn't come anywhere close to making SpaceX's valuation attractive.
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The launch of Space Exploration Technologies (NASDAQ: SPCX) as a newly traded public company was nothing short of spectacular. SpaceX made history with an initial public offering (IPO) valuation of roughly $1.8 trillion, instantly ranking it among the 10 largest companies by market cap. It soared in the immediate aftermath of the IPO.
However, the initial exuberance appears to be wearing off somewhat. Shares of the space technology/artificial intelligence (AI) company have pulled back moderately from its peak set last week. Should you buy SpaceX stock on the dip? Here's my honest take.
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The debate about SpaceX continues even with the recent dip
To be clear, SpaceX's modest sell-off has nothing to do with the company's underlying business or growth prospects. The reasons for buying the IPO stock remain fully intact.
Starlink is still the top dog in the satellite internet services market. SpaceX continues to dominate the launch business with its Falcon 9 rockets and Starship reusable spacecraft. Its xAI unit has picked up some high-profile deals providing compute capacity to Anthropic and Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google. The case for SpaceX seems to be strong from a business standpoint.
Some believe the case is strong for buying the stock, too. For example, Viraj Patel, Deputy Head of Research and Partner with independent data and research firm Vanda Research, thinks that the so-called "Magnificent Seven" stocks will be supplanted by the "Fab 10" -- with the original Magnificent Seven members plus SpaceX, Anthropic, and OpenAI.
On the other hand, concerns about SpaceX's valuation haven't died down even after its stock pulled back. Former Nasdaq (NASDAQ: NDAQ) CEO Bob Greifeld recently warned that SpaceX isn't trading on its fundamentals. He said that the combination of a highly restricted float available to retail investors and the inclusion of the stock in major indexes such as the Nasdaq-100 has led to SpaceX's share price being disconnected from the business's true value.
What should SpaceX's value be based on its business? Morningstar's (NASDAQ: MORN) analysts crunched the numbers and arrived at a fair value of $63 per share. That translates to a market cap of about $830 billion, a little over one-third of SpaceX's current market cap.
An honest take
I think SpaceX has an exceptional business model. The company should deliver robust growth for years to come. I'm truly excited about the possibilities for Starship and the opportunities for commercializing space.
That said, the recent dip doesn't come anywhere close to making SpaceX's valuation attractive. Perhaps a better entry point to buy the stock will come later this year, when the lockups expire, and insiders begin selling. For now, though, there are quite a few other stocks that I believe offer much more compelling risk-reward propositions than SpaceX.
Should you buy stock in Space Exploration Technologies right now?
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Keith Speights has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
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