Is SpaceX Stock a Buy After Its First Earnings Report?

For years, investors could only guess how much money Space Exploration Technologies (NASDAQ: SPCX) was making. Now, they finally have an answer.

SpaceX has reported its first quarterly results as a public company, giving investors an unprecedented look at the financial performance of one of the world's most ambitious businesses.

And the numbers are hard to ignore. Revenue nearly doubled from a year earlier. Starlink continued to add customers at a remarkable pace. The company is already generating billions of dollars from businesses beyond rocket launches.

So, after its first earnings report, is SpaceX stock a buy? I think investors should focus on three things.

Image source: Getty Images.

SpaceX is already a growth machine

The first takeaway is simple: SpaceX is no longer just a futuristic story. It's already a large and rapidly growing business.

SpaceX generated $7.8 billion of revenue in the second quarter, up 92% from a year earlier. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 191% to $3.5 billion, while its net loss narrowed to $541 million.

Those are extraordinary growth rates for a company of this size. More importantly, the growth isn't coming from a single product.

SpaceX still operates a rocket launch business. But Starlink, its internet connectivity business, has become an increasingly important part of the company, while its artificial intelligence business is already generating billions of dollars in revenue.

That's an important distinction. Investors aren't buying a company that promises to build the future someday. SpaceX is already building and monetizing parts of that future.

And that's why the first earnings report matters. It gives investors something they didn't have before: financial evidence that the SpaceX machine is working.

Starlink could be the secret weapon

Of all the numbers in the earnings report, I'd pay particular attention to Starlink.

The satellite internet business generated $4.3 billion of revenue in the quarter, up 66% from a year earlier. Its subscriber base reached roughly 12 million, about twice the level from a year ago.

But subscriber growth isn't the only interesting part. Starlink generated approximately $1.66 billion of operating income. That's what gets my attention.

Starlink isn't simply another exciting project that requires SpaceX to keep pouring money into it. It's becoming a profit engine.

Think about what that could mean. SpaceX can take the cash generated by Starlink and reinvest it into more satellites, rockets, and infrastructure. Those investments can expand Starlink's network and potentially allow it to serve more customers. More customers can produce more revenue and cash flow. That creates a potentially powerful flywheel.

In other words, Starlink gives SpaceX something many moonshot companies don't have -- a rapidly growing business that can help fund the moonshots. That could prove enormously valuable as the company pursues its ambitions.

The stock price is the problem

Here's where the investment case gets harder.

SpaceX's stock, as of this writing, trades at about $140, giving it a valuation of roughly $1.9 trillion. That's an extraordinary valuation, considering its latest revenue of $7.8 billion.

In other words, investors aren't paying $1.9 trillion for today's SpaceX. They're paying for tomorrow's SpaceX.

They're paying for continued Starlink growth. They're paying for the successful development of Starship -- SpaceX's next-generation rocket. They're paying for the company's rapidly expanding AI ambitions and for markets that may not even exist at a meaningful scale today.

That's why I wouldn't look at SpaceX's 92% revenue growth and conclude that the stock is cheap. It isn't. Great businesses can still be poor investments when expectations get too high.

At this valuation, SpaceX has to deliver more than impressive growth. It has to deliver years of extraordinary growth and eventually convert that growth into substantially higher free cash flow.

So, should investors buy SpaceX?

After its first earnings report, I'm more interested in SpaceX than I was before.

The company is growing at an extraordinary rate. Starlink is becoming a meaningful profit generator. And, perhaps most importantly, SpaceX is demonstrating that it can turn ambitious technology into businesses with real customers and real revenue.

But I wouldn't chase the stock simply because the numbers look impressive. The market already knows SpaceX is special. The question is whether it can become far more valuable than even today's enormous expectations suggest.

For that reason, I'd rather buy SpaceX during periods of weakness than at any price. A disappointing Starship test, slower Starlink subscriber growth, or concerns about the company's enormous capital spending could all cause the market to rethink its expectations.

Those moments may create better opportunities for long-term investors.

Lawrence Nga 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.