SpaceX Q2 Beat 92% Revenue Growth — But SPCX Faces Major $146.86 Resistance Before August 20 Lockup

TradingKey - SpaceX (SPCX) is seeing post-IPO gains bringing the price to $141.20 from a crash low of $105.75. Investors are actively considering the AI and Starlink business arms. The stock broke resistance from the descending channel and moved above the 50% Fibonacci retracement level of $139.04. The stock ran into a wall at the 61.8% Fibonacci level of $146.85, which converges with the broader resistance zone of $146.86 - $154.36. There are massive supply levels above this zone, which some traders will pay attention to. 

Above this zone is the August 20 post-IPO lockup expiration (911.5 million shares), which is a major supply level for the stock and may overwhelm any technically based gains or declines. Traders will be focused at $146.86 to identify a potential breakout level towards $154.36, and then potentially $163.36 - $172.14. For investors, the question is if the recovery is going to be sustained beyond the lockup selling.

The Fundamentals Remain Exceptional: 92% Growth, Starlink 12M Subs, AI $2.56B

SpaceX reported an excellent Q2 with AI business scalability. Revenues jumped 92% to $7.814 billion. Starlink reported connectivity of $4.291 billion (a 66% jump) and an impressive 12 million subscribers and 1.7 million net additions in the quarter (a new record). The AI business infrastructure scaled 247% to $2.561 billion. The company boasted an impressive adjusted EBITDA of $3.54 billion with a 63% margin and $1.22 billion positive free cash flow.

SpaceX informs us that $14.1 billion of cloud based services sales were contracted in Q2, with another $6.7 billion in early Q3. In response, Musk told employees that revenue from AI related activities would surpass all other SpaceX related business units by September, and would be many times larger by years end. The company intends to reach AI compute capacity of at least 10 gigawatts by 2027. To put that into perspective, such compute capacity would substantially surpass nearly all existing compute capacity today. Accordingly, the company estimated capex of $18.4 billion for 2022 Q2 primarily for AI hardware infrastructure.

Starlink Mobile Partnership Represents Massive Addressable Market Expansion

SpaceX's partnerships with AT&T, T-Mobile, and others signal participation in the $500 billion plus global market opportunity for mobile connectivity, as opposed to the $30-$40 billion rural broadband market. competing for. With nearly 22 million subscribers, the partnership represents a considerable new addressable market.

Clearly, SpaceX is working on the "invisible" opportunity to its core Starlink and broadband satellite service business. Starlink's Mobile satellite service partnership is a massive new revenue opportunity that is largely unexplored by most investors. This new partnership will offset the sunk costs for SpaceX's core satellite broadband investment.

SpaceX Exclusive NVIDIA Build Decision Is a Fresh Demand Signal

During an earnings call, SpaceX revealed that for its AI infrastructure it has exclusively decided to build with NVIDIA. The founder and CEO of SpaceX, Elon Musk, refers to the Vera Rubin AI computer as the "best available." This is important as SpaceX is an extremely advanced system with significant cost control who is an upstream purchaser. For NVIDIA, the potential for SpaceX to build 10GW is a significant new revenue opportunity.

The Negative: Enormous Capital Intensity Creates Financial Risk

The $18.4 billion Quinn’s Early Access Program (QEAP) cash flow with $15.83 billion allocated to Artificial Intelligence (AI) is a clear financial concern. This brings up the bigger question on if the company can cash flow the consumption of the capital it is using. For now, free cash flow looks favorable with positive $1.22 billion, but this could quickly change if the growth of AI revenue starts to slow and capital spending begins to increase in the absence of revenue growing to keep pace. 

As mentioned in a previous report, Starlink is displaying close to breakeven cash flow, so that will not be much help. The company also needs to be concerned about the material selling which could occur post August 20 lockup expiration since it is very likely that insiders and early employees will choose to cash out their unrealized gains.

SpaceX Technical Setup: Broken Channel, Facing Major $146.86-$154.36 Resistance

SpaceX busted above the descending channel that contained the price action since June on the 4 hour time frame. The recovery from $105.75 has been potent and has taken price above the short term moving average, past the 50% Fib at $139.04 and the 38.2 at $131.23.

SpaceX Price Chart - Source: Tradingview

There is equally as large resistance ahead of the price. The $146.85 Fib confluent with the highlighted resistance zone of $146.86-$154.36 is a large offer zone. Bulls will have some work to do to clear this zone. There is still some bullish trend continuation, but some of the urgency is leaving as RSI cooled to the 61 level from being in the overbought region.

Busting $146.86 would clear resistance and be much more bullish, but also clearing $154.36 is necessary to really open other levels to the upside around $163.36 and $172.14. There is still good support just below in the $139.04 area. With resistance holding, a move below $139.04 would open a move down to the $132.30-$131.22 area.

Key Levels (Aug 14)

• Immediate major resistance:  $146.86-$146.85 (61.8% Fib, must break)
• Extended resistance:  $154.36 (important level)
• Upside targets:  $163.36,  $172.14 (if $154.36 breaks)
• First support:  $139.04 (50% Fib, critical hold)
• Short-term EMA support:  $132.30
• Secondary support:  $131.22,  $131.23 (38.2% Fib)
• Deeper support:  $121.59
• Current price:  $141.20 (below major resistance)
• RSI:  61 (constructive, cooling from overbought)

August 20 Lockup Expiration Is a Major Near-Term Risk

The first lockup unlock on August 6 was reasonably well absorbed (stock up 6% on significant volume), with the market seeming to digest these type of events. However, things could be different if early investors decide to take profits, or if general market conditions become worse as well. Regardless of market conditions, traders should consider August 20 to be a potential catalyst for volatility.

The Bottom Line (Aug 14)

SpaceX's Q2 results were impressive with 92% revenue growth, 12M Starlink subs and 22M mobile partnerships, AI $2.56B (+250% YoY), $14.1B AI contracts signed, positive $1.22B free cash flow. SpaceX's AI exclusive partnership with NVIDIA further bolsters this future revenue stream. Musk anticipates that SpaceX AI will become their largest revenue stream by September. The $141.20 level provides a recovery from the crash at $105.75 and reflects the possibility of AI opportunities.

SPCX has broken the descending channel and is currently testing the 50% Fib at $139.04, but confronts significant selling pressure at $146.86 - $154.36 (61.8% Fib + Supply Zone). RSI at 61 is a positive sign and cooling down. A break of $146.86 opens $154.36 and then $163-$172. The August 20th lockup expiration is a near term concern.

For the short term trader, $146.86 is resistance. A break above would target $154 - $172. The longer term investor sees the positive fundamental case (92% growth, $14.1B AI contracts, Starlink Mobile), hence the recovery to the crash lows. However, the huge capex (AI will cost $18B+ per quarter) and the August 20th lockup concern will push a break above $146.86. Support is offered at $139.04 or $132.30. This is a technical analysis and not a recommendation to buy.