Should You Forget SpaceX Stock?
Key Points
After a strong bullish start, this newly IPO'd stock is underperforming.
This weakness isn't particularly surprising in light of how other, comparable stocks have performed following their public offerings.
The near-term odds aren't promising, but the longer-term statistics aren't exactly compelling either.
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Down 15% from June's initial public offering price and more than 30% below its post-IPO peak, it's safe to say many investors are more than a little disappointed in Space Exploration Technologies' (NASDAQ: SPCX) -- you know it better as SpaceX -- shares so far.
So now what? Is it worth buying or continuing to hold at its current price? Or, should investors take the recent weakness at face value and throw in towel on this ticker?
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Maybe something in between.
History says
With the dust of this mid-June IPO finally settling, it's time to say out loud what most people have only been quietly thinking to themselves. That is, like almost all other major initial public offerings for the past three decades, this one was buoyed by hype that was never built to last.
The stock could continue sinking before finding a bottom, too. Brokerage firm Edward Jones reports that between 2011 and 2020 -- a period when then-Facebook Meta, Peloton, Snapchat parent Snap, and Twitter (now X) all went public -- the average newly minted technology stock was down 14% from its IPO price just six months following its public offering. Again, IPO hype has an all-too-familiar pattern. Never mind the end of the lockups keeping current SPCX shareholders from shedding their now-deteriorating positions, which, of course, would only add to the selling pressure.
Longer-term, still a long shot
Just don't feel like you necessarily need to forego a stake in SpaceX forever. Post-IPO performance numbers from Nasdaq Economic Research indicate that between 2010 and 2020, newly public companies generating annual revenue in excess of $100 million end up, on average, at least keeping pace with the broad market's gains, if not slightly beating them.
Image source: Getty Images.
Still, take that information with a grain of salt. While the average three-year performance is positive, this average is skewed by a small handful of overperformers. Nearly two-thirds of these stocks were still in the red three years after their IPO.
In other words, don't bet the farm if you decide to go bottom-fishing.
Should you buy stock in Space Exploration Technologies right now?
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Peloton Interactive. The Motley Fool has a disclosure policy.
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