SpaceX Beat Expectations in Its First Earnings Report Since Going Public. Here's Why the Market Still Isn't Thrilled

Space Exploration Technologies Corp (NASDAQ: SPCX), better known as SpaceX, posted its second-quarter numbers yesterday, marking its first earnings report since it went public in June. Investors likely weren't surprised to see the company incur another loss while growing revenue, as this is a business that's spending significantly on growth and has only one profitable segment: its connectivity business, which centers around Starlink.

However, the company beat expectations, with both its top and bottom lines better than Wall Street expected. Often, that can be enough to send a stock rallying, and it could be the catalyst needed to turn a struggling stock around. SpaceX, while it started hot when its IPO first came out, has been crashing in recent weeks.

Why isn't the market thrilled with the results, and could SpaceX end up falling below $100?

Image source: Getty Images.

Revenue soared, but so did expenditures

The headline number for SpaceX was $7.8 billion in revenue for the period ending June 30. That was a massive 92% increase from the same period last year, with the bulk of the growth coming from its connectivity segment, up 66%, and artificial intelligence (AI), up 247%. Its space business grew by a more modest rate of 29%.

Overall, the company's revenue came in higher than analyst expectations of $6.9 billion, a solid beat for sure. Even its loss per share of nine cents was not nearly as bad as the $0.26 loss that Wall Street was bracing for. The space company did show some encouraging signs.

So what went wrong? While the revenue growth is what the company would probably want to see investors focus on, along with its improved bottom line, the mammoth, eyepopping figure that stood out related to capital expenditures: $18.4 billion. That's how much the company spent over just the past three months, with the bulk of it on AI. Contrast that with just $2.8 billion in capex a year ago, and it's clear why, with investors lately being more cognizant of businesses spending heavily on capex and especially AI, they would be concerned with these types of numbers.

Is SpaceX stock destined to fall further?

In early trading today, the stock was down double digits, as the market is by no means enthused about SpaceX's numbers. For all that expenditure, the market will want to see much stronger results.

And the bigger problem is that with a valuation of nearly $1.7 trillion, investors who buy the stock today don't have any real buffer or margin of safety if things go wrong. That's why I wouldn't be surprised if it fell below $100, because with so much risk and uncertainty, the stock is simply priced way too high.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.