Why SpaceX Could Be the Best Buy-and-Hold Stock of the Decade

Space Exploration Technologies (NASDAQ: SPCX) reported $14.6 billion in Q3 revenue, a 161% increase from the prior-year period. Net income reached $4.4 billion, compared with a $1.1 billion loss a year earlier. These are extraordinary numbers for a company that went public just five months ago. And while SpaceX is best known for launching rockets, its long-term growth prospects extend well beyond the space industry. Between its expanding Starlink satellite broadband network, reusable rockets, and growing artificial intelligence (AI) business, SpaceX could gain significant ground over the next decade.

Starlink is becoming a profit powerhouse

Starlink ended September with 13.6 million consumer subscribers, up from 7.2 million a year earlier. That's an 89% increase.

SpaceX's connectivity business, which includes Starlink, generated $5.25 billion in third-quarter revenue, up 69% year over year, and operating income jumped 99% to approximately $2.37 billion.

Unlike other satellite network operators, SpaceX both manufactures and launches its own satellites. Its reusable rockets let the company deploy additional capacity without the need to rely on an external launch provider.

Image source: Getty Images.

Starlink also serves businesses, airlines, ships, and government customers, giving it plenty of opportunities beyond providing residential internet service. Make no mistake: Its potential customer base remains substantial, particularly in regions where conventional broadband infrastructure is limited or unavailable. And demand is likely to remain strong for at least the next 10 to 12 years.

Artificial intelligence could drive another wave of growth

SpaceX is also becoming a major artificial intelligence company as it expands into AI infrastructure and software. Its "super intelligence" segment actually helped drive third-quarter revenue growth, adding $6.7 billion compared with the prior-year period.

The company also expanded its computing infrastructure to 1.7 gigawatts of installed capacity as of Sept. 30. That gives SpaceX exposure to two rapidly expanding markets: satellite communications and artificial intelligence.

Management is pursuing a plan to deploy space-based computing infrastructure, too, although that remains an ambitious and expensive undertaking with considerable technical uncertainty. Still, SpaceX already has something many emerging technology companies lack: substantial revenues and profits.

The biggest concern is valuation

SpaceX went public in June at $135 per share, valuing the company at approximately $1.77 trillion. That's an enormous valuation, even for a business growing as quickly as SpaceX. The company is also spending aggressively to expand its infrastructure. In the third quarter, its capital expenditures reached approximately $19.6 billion. These investments could support future growth, but they also create financial risks if demand disappoints or major projects take longer than expected to complete.

Competition in AI, regulatory challenges, satellite replacement costs, and the expense of developing its Starship rocket platform could also put pressure on the company's profitability in the future. And don't assume SpaceX will continue to grow at the extraordinary rate it did in the third quarter for any great length of time.

That said, the combination of SpaceX's position in commercial spaceflight, its rapidly expanding satellite communications network, and its substantial AI business is one that no other company can match. If management can sustain strong revenue growth while improving cash generation, SpaceX could reward patient shareholders over the next decade.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool recommends Space Exploration Technologies. The Motley Fool has a disclosure policy.