Should You Forget SpaceX (SPCX) Stock?
Key Points
SpaceX has a ton of growth potential.
Its revenue recently surged 92% -- while it posted a net loss.
The stock's valuation is steep.
Space Exploration Technologies (NASDAQ: SPCX), commonly referred to as SpaceX, got an initial share price bounce when it IPO'd due to enthusiasm about what it might do over the years to come -- such as building orbital data centers. It's also an Elon Musk company, which draws a lot of interest. (Tesla has averaged annual gains of 39% over the past decade.)
You might be wondering whether you should buy shares yourself or just forget about it.
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I myself am forgetting about it, but every investor is different, so it's worth learning more and making your own decision. Here are some considerations.
Image source: Getty Images.
Why you might buy SpaceX
Here are reasons for buying:
- Some Wall Street analysts are bullish on it. The stock recently traded around $150 per share (as of Sept. 3), and the average one-year price target from analysts is $222, roughly 48% higher.
- SpaceX is a leader in space launches, and its Starlink leads in satellite communications. Those are areas with plenty of growth potential. It also has an artificial intelligence (AI) platform.
- It's already growing. Its second quarter featured revenue up 92% year over year to $7.8 billion.
Why you might forget SpaceX
Those may be some compelling reasons to buy, but here are some reasons to pass on SpaceX:
- While revenue is up, its bottom line is red, with a second-quarter net loss of $541 million. (That's an improvement from the year-earlier loss of $1 billion.)
- Its valuation is steep. There are no earnings, so there's no price-to-earnings (P/E) ratio. But the price-to-sales ratio is a steep 65, and the forward-looking P/E ratio was recently 194. There's no margin of safety here. If the company fumbles, the stock could fall sharply.
- More than a billion early investors' shares will be "unlocked" in September and October, allowing them to be sold -- which could send shares downward.
Think it through for yourself and do some more research. I'm steering clear based on what I'm seeing.
Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.