Here's Why I Haven't Bought SpaceX Stock and Probably Never Will
Key Points
SpaceX stock seems to offer no margin of safety at recent levels.
I see Elon Musk as a drawback.
It could do well in the long run, but it's a risky proposition.
- Motley Fool Issues Rare "Total Conviction" Buy Alert ›
Space Exploration Technologies (NASDAQ: SPCX), commonly referred to as SpaceX, is a hot stock these days, and it's even up 25% over the past three months as of Oct. 22. You might want to buy some shares, but I don't think I ever will, for a variety of reasons. My main reason is that I don't sufficiently understand the company.
One of my heroes is Warren Buffett -- who's famous for staying within his "circle of competence" -- meaning he steers clear of stocks that he doesn't fully understand. I am not always good at following this advice, but with SpaceX, I do.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Image source: The Motley Fool.
SpaceX is a leader in space launches, satellite communications, and artificial intelligence (AI). Those are all fast-growing niches. But I must admit that I'm far from an expert on satellites and space operations. That makes it hard for me to really assess SpaceX's challenges and opportunities.
Meanwhile, there are ample other reasons why I'm steering clear. Let's start with the stock's valuation. Its price-to-sales ratio, for example, was recently 58. Compare that to the S&P 500's ratio of 3.5. That 58 figure is high. It essentially means that there's no margin of safety here. If SpaceX makes some missteps, the stock could drop sharply.
And:
- The company only turned profitable in the last quarter. That's not necessarily a bad thing, but I prefer long track records of revenue and profit growth.
- It's burning through cash at a rapid rate -- around $10 billion in its last quarter.
- It pays no dividend. These days, I'm focusing more on dividend payers, as I hope to retire within a decade and want to set up long-term income.
- Finally, there's SpaceX founder and CEO Elon Musk. I don't see him as a good leader, and he isn't laser-focused on SpaceX, as he has multiple other irons in the fire.
I think the case against the stock is strong. It could do very well, but a lot has to go right for the company, and that's far from guaranteed.
Should you buy stock in Space Exploration Technologies right now?
Before you buy stock in Space Exploration Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Space Exploration Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $334,631!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,312,844!*
Now, it’s worth noting Stock Advisor’s total average return is 893% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of October 31, 2026.
Selena Maranjian 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.
Recommended Articles
