Should You Forget SpaceX (SPCX) Stock?
Key Points
SpaceX has a ton of growth potential.
Its revenue recently surged 92% -- while it posted a net loss.
The stock's valuation is steep.
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Space Exploration Technologies (NASDAQ: SPCX), commonly referred to as SpaceX, got an initial share price bounce when it IPO'd due to enthusiasm about what it might do over the years to come -- such as building orbital data centers. It's also an Elon Musk company, which draws a lot of interest. (Tesla has averaged annual gains of 39% over the past decade.)
You might be wondering whether you should buy shares yourself or just forget about it.
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I myself am forgetting about it, but every investor is different, so it's worth learning more and making your own decision. Here are some considerations.
Image source: Getty Images.
Why you might buy SpaceX
Here are reasons for buying:
- Some Wall Street analysts are bullish on it. The stock recently traded around $150 per share (as of Sept. 3), and the average one-year price target from analysts is $222, roughly 48% higher.
- SpaceX is a leader in space launches, and its Starlink leads in satellite communications. Those are areas with plenty of growth potential. It also has an artificial intelligence (AI) platform.
- It's already growing. Its second quarter featured revenue up 92% year over year to $7.8 billion.
Why you might forget SpaceX
Those may be some compelling reasons to buy, but here are some reasons to pass on SpaceX:
- While revenue is up, its bottom line is red, with a second-quarter net loss of $541 million. (That's an improvement from the year-earlier loss of $1 billion.)
- Its valuation is steep. There are no earnings, so there's no price-to-earnings (P/E) ratio. But the price-to-sales ratio is a steep 65, and the forward-looking P/E ratio was recently 194. There's no margin of safety here. If the company fumbles, the stock could fall sharply.
- More than a billion early investors' shares will be "unlocked" in September and October, allowing them to be sold -- which could send shares downward.
Think it through for yourself and do some more research. I'm steering clear based on what I'm seeing.
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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