Why Does Redwire Stock Keep Going Down?
Key Points
SpaceX was about to IPO, and investors bought Redwire while they waited for it.
Then SpaceX IPO'ed -- then investors started selling Redwire stock.
It's not hard to follow the money here.
- 10 stocks we like better than Redwire ›
Do not say you were not warned.
Previewing the SpaceX (NASDAQ: SPCX) IPO earlier this year, I explained what investors should expect in three simple steps.
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- First: SpaceX IPO fever would make space stocks skyrocket -- and Redwire (NYSE: RDW) roughly doubled in four months.
- Next: Investors would question whether they wanted to own a second-tier space stock like Redwire at all, when industry leader SpaceX would soon go public.
- Finally: Investors would rush to sell other space stocks, and put the money in SpaceX instead.
We're in this final stage now, and Redwire stock is down 22% since SpaceX's IPO.
Image source: Getty Images.
Redwire goes ice cold
Redwire stock dropped another 10.5% through 10:25 a.m. ET today -- while SpaceX stock gained nearly 10%. This brings to mind the old advice "follow the money," except here, the money trail is so obvious you don't really need to do much following.
Investors are pulling money out of Redwire and pouring it into SpaceX stock instead.
What's next for Redwire stock
For Redwire investors, this has to feel discouraging -- but here's where the news turns good. According to data from StreetInsider.com, call options to buy Redwire stock at higher prices are currently outrunning put options to sell Redwire stock by a 3.6-to-1 ratio.
This tells me that serious investors are preparing for a serious rally in Redwire stock.
Are they right? That's hard to say. Deeply unprofitable and burning cash, Redwire isn't expected to earn even an EBITDA profit before 2027, and GAAP profits are even farther away. Still, when I look at unprofitable SpaceX stock that costs 130 times sales, versus Redwire stock trading for just six times sales, I know which one I'd pick.
Redwire stock is the better value play here.
Should you buy stock in Redwire right now?
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Rich Smith 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.
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