SpaceX Is Nearing Its IPO Price. Time to Buy?

Space Exploration Technologies (NASDAQ: SPCX) fell to a low of just below $138 per share in the July 13 trading session. This means that just over a month after the stock's initial public offering (IPO), it has almost fallen to its IPO price of $135 per share as of the time of this writing.

Nonetheless, despite the fact that average investors can now buy the communication stock near the IPO price, investors still have good reason to stay away, and here's why.

Image source: The White House.

The state of SpaceX stock

Admittedly, SpaceX stock is potentially an attractive holding. Its founder, Elon Musk, is one of the great innovators of our time, and his automobile and AI company, Tesla, made some smaller investors wealthy.

Today, SpaceX dominates the private market for rocket launches, and its Starlink segment is the largest provider of satellite internet services. Also, if initiatives such as data centers in space succeed, SpaceX is likely to make investors wealthier.

The problem for investors is that the stock already prices in years of growth. Part of that is its $1.8 trillion market capitalization. That is probably too large a size to repeat the 24,600% lifetime gains in Tesla, whose current market cap of $1.5 trillion is below that of SpaceX.

Moreover, much of the reason SpaceX has reached this market value is that it trades at a trailing price-to-sales (P/S) ratio of about 96 as of this writing. Bullish investors are likely eyeing forecasts for 108% revenue growth in 2026 and 86% the next year.

However, if its stock price stays the same, that would mean a 46 forward P/S ratio and a forward one-year sales multiple of 25. High-growth stocks tend to trade at sales multiples in the teens and twenties, implying the price is at least two years ahead of itself.

Furthermore, analysts expect Micron Technology to grow revenue at 247% this year and 81% in 2027. Yet, it sells at a trailing P/S ratio of 12. Micron is a fundamentally different business, so it is far from a perfect comparison. Still, it leaves investors wondering why they should pay SpaceX's massive growth premium when other stocks offer faster growth at a fraction of its valuation.

Avoid SpaceX

Considering its growth and valuation, SpaceX still appears too richly valued, even as it nears the IPO price.

Musk has built a track record of success, making SpaceX stock a desirable holding, objectively speaking. But the company's market cap shows how average investors did not get to capitalize on SpaceX's growth in the same way they benefited from Tesla. Companies like Micron show that investors can buy comparable revenue growth at a fraction of SpaceX's massive premium.

Ultimately, time will tell how low SpaceX stock can go. Still, until investors can buy SpaceX at a lower cost, they should probably avoid the stock.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Tesla. The Motley Fool has a disclosure policy.