While I Like SpaceX, Here's Why I'm Not Buying Its Stock Yet

Space Exploration Technologies (NASDAQ: SPCX) is undeniably a category leader. The company's rocket-launching services dominate the market, and its satellite internet and mobile services are also clear-cut frontrunners in markets with significant long-term growth potential. In addition to those very promising positions, the company is also a compelling player in the artificial intelligence (AI) processing market and is ramping up investments to become a top competitor in the category.

And yet, I'm not ready to buy the stock. Here's why.

SpaceX undeniably has a lot of promise

SpaceX provides bleeding-edge technologies across multiple categories. The company revolutionized rocketry by developing launch-and-land rockets that can be reused for subsequent missions. Thanks to these capabilities, the company has been able to provide launch services to third-party customers at very cost-effective price points. The company accounted for roughly 51% of total global orbital launches last year and 85% of total satellite launches.

Image source: Getty Images.

The company's launch capabilities also give it huge advantages in the satellite-based mobile and internet services space. SpaceX's Starlink platform is a leading provider in these categories, and the company's strengths in launch technologies mean it can get communications satellites into space at prices that competitors will likely struggle to match for a long time.

Along with its rocket launch and satellite communication technologies, SpaceX is also rapidly expanding its position in the AI processing market. Of the $28.5 trillion total addressable market (TAM) outlined in the company's initial public offering (IPO) prospectus, management estimates that $26.5 trillion of that TAM comes from AI technologies and services. SpaceX's goal of building a massive constellation of orbital data centers looks highly ambitious and comes with a range of technological challenges, but the company that solved the challenges involved with reusable rockets is arguably the one best positioned to make large-scale, space-based AI processing a reality.

SpaceX's tech is incredible, but that doesn't mean the stock is right now

SpaceX has already delivered revolutionary technologies, and I think there's a good chance its capabilities will play a significant role in advancing key tech trends through the next decade and beyond. The company has achieved laudable breakthroughs and scaling initiatives, and I think it would be a mistake to bet against it continuing to advance its forefront positions at the edges of highly influential tech trends. On the other hand, there is still the question of valuation.

With a market capitalization of roughly $2.07 trillion, the company is valued at roughly 111 times the $18.7 billion in revenue it recorded last year. Admittedly, SpaceX will likely see a meaningful acceleration for its sales growth this year -- with major AI compute deals with Alphabet and other customers aiding its revenue expansion, and strong support for its Starlink and rocket launching businesses also adding to growth.

On the other hand, spending also looks poised to ramp dramatically going forward -- and I think risks related to interest rates and the overall macroeconomic backdrop make SpaceX's valuation profile too risky in the current environment.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.