SpaceX Just Delivered a Monster Quarter, but the Stock Is Still Down 38% From Its High. The Reasons Are Obvious.

When Space Exploration Technologies (NASDAQ: SPCX) made its stock market debut in June, investors rushed in to participate in what some considered a once-in-a-generation investment opportunity.

SpaceX stock reached an all-time high of $226 on June 16, briefly propelling its valuation above those of Microsoft and Amazon. However, enthusiasm has cooled quite a bit.

As of this writing (Nov. 2), SpaceX stock traded at roughly $140, representing a staggering 38% decline from its peak. Let's assess why Wall Street is punishing SpaceX right now and determine if this sell-off represents a buying opportunity for long-term investors.

SpaceX's Q3 earnings were impressive across the board

SpaceX's third-quarter financial report proved that its transformation into a diversified technology company is gaining momentum. The Starlink connectivity business generated $5.2 billion in revenue, representing 69% year-over-year growth. Operating income from this segment doubled to $2.4 billion.

Meanwhile, SpaceX's Super Intelligence (SI) division generated $7.6 billion in revenue, up 830% year over year. This business is benefiting from growing demand for computing capacity, including agreements with major AI developers such as Anthropic and Alphabet. Moreover, SpaceX is also developing its Grok AI model while pursuing longer-term opportunities involving orbital data centers.

Perhaps the most encouraging part of the earnings report was that SpaceX's consolidated operating income reached $2.8 billion, compared with an operating loss of $273 million last year. Even so, robust earnings don't always translate into strong stock performance. Sometimes, investors are more concerned about what lies ahead than what a company has already achieved.

Why is SpaceX stock down?

I see three reasons for the decline in SpaceX stock.

First, the expiration of IPO lockup agreements is introducing selling pressure. Lockup agreements temporarily prevent certain employees, executives, and early investors from selling shares following an IPO. As these restrictions expire, previously unavailable shares become eligible for trading.

According to its IPO prospectus, SpaceX established a staggered release schedule, allowing up to 59.1 million shares to become eligible for sale after 91 days, followed by three additional releases of up to 328.4 million shares each. Furthermore, up to 1.3 billion additional shares became eligible for sale following the company's third-quarter earnings announcement.

Becoming eligible for sale doesn't mean every shareholder immediately sells. However, the idea of additional supply can weigh on investor sentiment, especially when early shareholders are likely sitting on life-changing gains.

Second, SpaceX's valuation was arguably stretched from the get-go. At its June peak, SpaceX boasted a market capitalization of more than $2.6 trillion. Even after its sell-off, the company remains valued at $1.9 trillion. Based on Wall Street's expected 2026 revenue forecast of $48.9 billion, this represents a price-to-sales (P/S) ratio of 39. That's a hefty premium for a company operating several capital-intensive businesses.

Third, SpaceX's ambitions require enormous capital expenditures (capex). During the third quarter, the company spent $19.6 billion on capex. For perspective, that investment exceeded SpaceX's entire revenue for the quarter.

While operating profitability is improving, the company's aggressive spending plans will pressure free cash flow. As a result, SpaceX is turning to debt financing to support its infrastructure expansion, including a reported $40 billion offering to buy GPUs.

This creates another layer of risk. Building AI data centers requires substantial capital outlays up front, but the returns on these investments are entirely dependent on customer demand, pricing dynamics, and utilization rates.

Image source: Getty Images.

Should you buy the dip in SpaceX stock?

The recent sell-off underscores an important distinction between business performance and stock performance. SpaceX can continue delivering robust financial results while its stock declines if investors think they are paying too much for future growth.

While this doesn't necessarily mean the underlying investment thesis is broken, it also doesn't automatically make the stock cheap. SpaceX still carries a premium valuation, and its expansion plans will require meaningful additional financing. At the same time, the payoff from these infrastructure investments is far from guaranteed.

Nevertheless, I think SpaceX's decline could be an opportunity to begin gradually accumulating shares. Rather than attempting to identify the exact bottom, building a position over time will help manage the risks associated with additional lock-up expirations and valuation adjustments.

All told, SpaceX's sell-off is a mixture of technical selling pressure, elevated valuation expectations, and concerns about accelerating capex. While its latest earnings report suggests the business is strengthening, the stock will likely remain volatile as Wall Street reassesses the company's ability to generate cash flow consistently. For patient investors willing to tolerate that uncertainty, I think SpaceX is a compelling long-term opportunity.

Adam Spatacco has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.