SpaceX Stock Is Back Near Its IPO Price After a 24% Drop. Here's How to Decide Whether to Buy, Hold, or Sell

Space Exploration Technologies (NASDAQ: SPCX) made its public debut this month, and demand was so intense that the stock quickly shot up to $225 per share from its original $135 initial public offering (IPO) price. The hype has since died down, and SpaceX is currently trading near $150 as of this writing. So how do investors decide whether to buy, hold, or sell in light of this pullback?

First, we must consider the price dip itself and whether it is truly an opportunity, a warning, or just short-term noise to ignore. There really isn't much analyst consensus on SpaceX. Price targets range from an absurdly high $310 to $62 per share, so different conclusions can be reached from the outset.

Only time will tell who has the correct take on Elon Musk's multi-trillion-dollar business. However, this dip is likely driven by a combination of fears and concerns about SpaceX's debt load, inflated valuation, and ability to grow revenue to justify that sky-high valuation.

Image source: The Motley Fool.

SpaceX announced it would issue $25 billion in bonds this week, following its record-breaking $85 billion IPO raise. The additional debt has some investors concerned. Lastly, insider lockups will expire in the coming months, which could trigger a selling spree that pushes the stock lower. With all that said, this dip is generally reactionary and not necessarily tied to SpaceX's financials. The company hasn't even released its first quarterly earnings report.

Should you buy?

While SpaceX's price is still inflated, there's a bull case to consider: the businesses it owns and their growth trajectory. The subsidiary Starlink, a satellite Internet network, is globally scalable and already generates recurring revenue. SpaceX also owns xAI, which lags competitors, but could catch up over time and eventually become profitable. SpaceX, of course, currently dominates the medium-lift reusable rocket market.

There's a lot of potential revenue in a diversified portfolio. Success stories like Amazon, which is both an e-commerce platform and a leading cloud provider, show what is possible with successful execution and a long enough time horizon.

Should you hold?

If you already hold SpaceX shares, the stock will be volatile for the foreseeable future, and trying to time the market isn't a winning strategy in the long run. It's going to take years for revenue to catch up with valuation. Right now, SpaceX trades at more than 100 times its sales. Holding the stock will require the stomach to handle price swings.

The stock has been trading for less than a month, so holding is a reasonable option because investors haven't given the company nearly enough time to find its footing.

Should you sell?

If you bought SpaceX and the stock has become too concentrated in your portfolio, or you find yourself unable to handle the volatile price swings, you may want to consider reducing your position. Or perhaps you've become bearish on the space industry and on SpaceX's ability to become a profitable, cash-flowing machine. In that case, selling makes sense.

There isn't one right answer when it comes to buying, holding, or selling any stock. In general, it's best to buy and hold for a minimum of five years to give stocks a chance to grow and weather any market downturns. In the case of SpaceX, investors need patience, a high risk tolerance, and the ability to wait for revenue to catch up with the more than $2 trillion valuation.

That may not happen for several years. Your personal portfolio goals are what matter most.

Catie Hogan 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.