SpaceX Stock Looks Expensive. Here's the Valuation Case for and Against.

On the surface, Space Exploration Technologies (NASDAQ: SPCX) looks like it is trading at a stratospheric valuation. However, valuations, especially for a stock like SpaceX, aren't always straightforward, and CEO Elon Musk has said the company could be worth more than the Earth's economy.

Let's look at the valuation case for and against the AI stock.

The case that SpaceX stock is cheap

While SpaceX stock does not look cheap on the surface, it could look very inexpensive in a few years. Musk has projected that the company could generate $1 trillion in revenue by 2030 and $3.5 trillion by 2033, a staggering amount. That is also well above the current 2030 revenue consensus of $427.1 billion and the 2033 consensus of $1.54 trillion.

While $1 trillion in revenue by 2030 is a huge number, the company can achieve that lofty goal. The company's biggest growth driver in the coming years will be its AI infrastructure business, which is all about access to AI chips and the funding to support these build-outs. This is where SpaceX has a big advantage.

The company has formed a very close relationship with Nvidia, which should give it increasingly more access to its graphics processing units (GPUs). If SpaceX can also get its Terafab joint venture off the ground, it will give it a decided advantage in procuring chips and memory. Musk also holds a lot of clout, and given the company's over $2 trillion valuation, SpaceX should easily be able to raise the funds to support such a build-out through both debt and equity.

On top of that, SpaceX should see strong growth from Starlink, its launch business, and AI coding following its acquisition of Cursor. After acquiring spectrum from Grain Management, SpaceX also appears poised to become more involved in the U.S. mobile market, which is worth more than $350 billion. Meanwhile, its planned $100 billion Starbase Louisiana could lead to a much more aggressive launch schedule in the future.

If SpaceX can get anywhere close to $1 trillion in revenue by 2030, the stock will look undervalued. Tesla has always traded at a premium due to Musk, and the same should be expected for SpaceX. Place a 10 times price-to-sales (P/S) multiple on SpaceX, and it could be a $10 trillion stock in several years, nearly 5 times what it is worth today.

Image source: The Motley Fool.

The case that SpaceX stock is expensive

The case that SpaceX is trading at an expensive valuation is a bit more straightforward. The company generated only $18.7 billion in revenue last year, and the current analyst consensus for this year is $45.4 billion. That's light-years away from $1 trillion in revenue.

Meanwhile, while AI infrastructure will be a major driver of SpaceX's revenue, it also comes at a high cost, requiring substantial upfront capital to build data centers. Right now, the company is getting a very short payback on its investments (about one year on chips and networking) because it is doing short-term leases in a compute-constrained environment. However, as compute capacity grows, these favorable economics may not last.

Pushing into the mobile market also would have to be accompanied by a large capital expenditure (capex) outlay, as would its space venture. While SpaceX has a significant revenue opportunity ahead, it's going to have to spend an enormous amount of money to capture it. Added debt and an increased share count from equity raises could lead to a lower share price than it might otherwise achieve if it were a capex-light business.

Given this, the stock looks pricey, trading at a forward P/S multiple of 49 times this year's estimates and 19 times next year's. Notably, this is not a capex-light, high-gross-margin recurring-revenue business model like Palantir. You can much more easily justify that type of multiple with those businesses than one like SpaceX's that requires so much future capex.

It's also worth noting that Musk has a pretty spotty track record with the timing of his predictions, often being many, many years off.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.