SpaceX Stock Is Down Again Today. Is Now the Time to Buy?
Key Points
SpaceX stock is now about 12% off its high.
Whether to buy now depends on one's investment goal.
Elon Musk is much more optimistic than Wall Street analysts on revenue growth.
- 10 stocks we like better than Space Exploration Technologies ›
The frenzy over the Space Exploration Technologies (NASDAQ: SPCX) IPO is subsiding as SpaceX shares are heading for their second straight down day. While the stock is still above its opening-day closing price of $161 per share, investors who thought they missed out might be considering jumping in as it drops.
SpaceX stock is now about 12% off its high with today's 7.6% drop, as of 1:25 p.m. ET. The decision on whether to jump in now depends on one's investment plan.
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Valuation versus potential
Just because SpaceX stock has dropped doesn't make it a bargain. At least not from a typical valuation perspective. Even if it grows as fast as CEO Elon Musk predicts, the company is still trading at a lofty price-to-sales (P/S) ratio. The company generated $4.7 billion in Q1 revenue, but Musk posted on social media that he believes it will exceed $1 trillion in sales in 2030.
Wall Street is more conservative, with Goldman Sachs and Morgan Stanley reportedly expecting about $470 billion and $330 billion, respectively, in 2030. Even at the higher estimate, the stock would trade at a P/S of 5 based on sales nearly five years out.
It's likely SpaceX stock will remain volatile. It is also likely that the share price will drop to a more reasonable near-term valuation level. For those looking to hold for 10 or 20 years, though, this week's decline may be an opportunity to at least begin adding some SpaceX stock to a portfolio.
Should you buy stock in Space Exploration Technologies right now?
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.
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