SpaceX vs. Tesla: Here's Which Elon Musk Stock I'd Buy Right Now

Space Exploration Technologies (NASDAQ: SPCX), or SpaceX, has been a publicly traded company for seven days. Tesla (NASDAQ: TSLA) stock has been public for 16 years. SpaceX is the newer, shinier Elon Musk toy, and it's getting more attention from the two companies' co-CEO today.

Right now, there's one reason you might want to own SpaceX stock over Tesla. But I'm not 100% convinced this is the right choice.

Image source: Getty Images.

What to know about SpaceX

SpaceX has three main areas of business, which it calls Space (old-school SpaceX), Connectivity (SpaceX's Starlink subsidiary), and AI -- the division Musk formed by merging artificial intelligence company Grok into social media company X, before he merged both those companies into SpaceX.

Of the three, Space is the best-known business and the one from which SpaceX derives its name. Starlink is the company's only profitable business, earning $4.4 billion in operating profit last year, according to the SpaceX IPO Prospectus.

SpaceX sees its brightest future in artificial intelligence; however, it predicts this division will account for $26.5 trillion of its eventual $28.5 trillion total addressable market (TAM). It's also the business where SpaceX splashed out $60 billion to acquire Cursor last week.

What to know about Tesla

Tesla is a little different. Like SpaceX, Tesla has a core business: selling electric cars. This division accounted for 86.5% of Tesla's $94.8 billion in revenue last year, according to data from S&P Global Market Intelligence.

Tesla also has an Energy Generation and Storage business -- solar power and batteries. Similar to the situation with SpaceX's Starlink vis-à-vis Space, this corollary business is arguably better than the business for which the company is best known. "Energy" at Tesla earns 30% gross profit margins -- twice as profitable as Tesla's Automotive unit!

Last and least is Tesla's robotics business, currently just a start-up that lacks its own division, though robotics is analogous to "AI" at SpaceX. According to Elon Musk, this business that barely registers today could one day be building 1 billion humanoid robots a year and lift Tesla's market value past $25 trillion.

SpaceX vs. Tesla

Both SpaceX and Tesla are very expensive stocks. Investors in both companies are betting heavily on presently unfulfilled prospects: abundant AI profits in the case of SpaceX, and 1 billion robots a year for Tesla.

Which dreams are more likely to materialize in the future is hard to say. What I can tell you is how the two stocks' valuations look today to minimize the risk of overpaying for a future that may not materialize.

Let's start with SpaceX. The space company generated $19.3 billion in revenue over the past year and lost $8.7 billion in the process. SpaceX boasts about $70 billion in net cash, which is great -- because SpaceX is burning nearly $20 billion in negative free cash flow per year.

Tesla, on the other hand, seems a much more stable business. Annual sales approach $98 billion and are profitable, with an operating profit margin of 4.9%. Free cash flow is positive -- $7 billion annually -- adding to Tesla's $30 billion in net cash on the balance sheet.

Of the two, I prefer Tesla as the less risky of the two very risky stocks.

Rich Smith 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.