SpaceX Is Down Nearly 50% From Its All-Time High -- That's Great News for Long-Term Investors

Space Exploration Technologies (NASDAQ: SPCX) has been on a remarkable losing streak. As of this writing, ten out of the previous 12 trading days have ended with a new record-low closing price. SpaceX's stock is trading roughly 50% below its all-time high of $225 and about 15% below its $135 IPO price.

I could insert a tired joke on failed launches or downward trajectories, but that would only distract from an important point: If you've been holding out on buying SpaceX, the buying opportunity might be coming into view. Here's what I mean.

Why SpaceX's falling share price is improving its long-term potential

Throughout SpaceX's short life on the market, the stock -- at least for disciples of Warren Buffett and Benjamin Graham like moi -- has been overburdened by an absurdly high valuation. I could pull any valuation metric out of my hat -- a price-to-sales ratio of 77, for instance -- but you square it, SpaceX stock has looked repulsively pricy by traditional standards.

It still, to be sure, does: Even after losing $1.2 trillion -- an amount roughly equivalent to the individual market caps of Tesla, Micron, and Berkshire Hathaway -- the stock carries a market cap of $1.5 trillion, which is still higher than the three mega companies just mentioned.

But now that SpaceX has shaved off -- and is continuing to shave -- some of its excessive valuation, the margin of error for investors grows wider. Before, at a multitrillion-dollar valuation, SpaceX would have to perform so perfectly that nothing short of space-based AI data centers and multiplanetary civilization would have been enough to send the stock soaring.

Image source: Getty Images.

With half of its valuation wiped out, SpaceX no longer has to conquer the solar system to get investors to pay attention. Indeed, one might say that actual business growth will begin to matter more than whatever ambitious vision the space company can cook up next.

To be sure, those unrealized, galactic ambitions are still driving much of the stock's current trillion-dollar valuation, which is why investors still should exercise caution.

For example, it's easy to look at its rounded-up 2025 revenue of $19 billion and say, "Yeah, but its (self-reported) total addressable market (TAM) is $28.5 trillion!" Never mind that $28.5 trillion is about $9 trillion larger than China's entire economy and only about $2 trillion shy of the United States'. As with any company whose valuation depends on hypothetical future business, a good dose of clear-headed rationality could stop you from sinking the nest egg into what amounts to a fantasy.

Let me be clear: A lower share price does not necessarily make SpaceX a better business. It does, however, make the same business cheaper to buy. And since I believe SpaceX has the leadership, technical knowledge, and ambition to expand the limits of human civilization, every bit of air that comes out of this obscenely valued stock makes me feel slightly more bullish.

But not bullish enough to buy: not yet. Personally, I don't think SpaceX belongs in the trillion-dollar club yet. I would continue to hold off on buying SpaceX for now, at least until its valuation looks even more reasonable or until its financial results catch up to its extraordinary ambitions.

Steven Porrello has positions in Micron Technology. The Motley Fool has positions in and recommends Berkshire Hathaway, Micron Technology, and Tesla. The Motley Fool has a disclosure policy.