Why SpaceX Stock Dropped After Earnings
Key Points
SpaceX gave investors a few reasons to buy it yesterday.
Today, analysts are starting to look for reasons to sell SpaceX.
Reason No. 1: SpaceX may merge with Tesla.
"What goes up must come down," goes the saying -- and nowhere is this more true than at volatile Space Exploration Technologies (NASDAQ:SPCX) stock!
Yesterday, shares of Elon Musk's famed space-'n'-AI company soared 7.8% after SpaceX reported a $0.35 per share profit that was more than twice the $0.16 per share that Wall Street analysts had predicted. SpaceX also confirmed that its "Super Intelligence" business -- formerly known simply as "AI," and before that as "xAI," and before that as "Twitter" -- has finally turned profitable, growing sales 830% and earning $431 million in quarterly profit for SpaceX.
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Today, SpaceX stock is heading in the other direction, down 5.8% as of 11:45 a.m. ET. But why?
Image source: The Motley Fool.
More answers than you can shake a stick at
Everyone seems to have a theory about why SpaceX stock is down today. Here are a few of them, as collated by our friends at StreetInsider.com:
The first theory -- one that I've voiced myself -- is that SpaceX may be contemplating a merger with Tesla (NASDAQ:TSLA).
Considering all the things the two companies have in common, both being heavily involved in both solar power and artificial intelligence -- such a merger makes sense, and I'd say it's more likely to happen. Investors may, however, be leery of the price SpaceX might pay for Tesla, which currently trades at more than 350 times trailing earnings and just reported a 5% decline in quarterly profit.
A second theory is that investors are worried about regulatory risk -- not just the risk that regulators will quash an attempted merger, but that SpaceX may have gotten itself in trouble by (allegedly) ordering a slowdown of Starlink connection speeds in Ukraine.
Finally, there's the financial risk. While SpaceX reported a GAAP profit in Q3, SpaceX continues to burn enormous amounts of cash. Year-to-date, the company's cash burn has just passed $35 billion. Profitable or not, investors may be questioning how long that's sustainable.
Simply put, if an investor is looking for a reason to sell SpaceX stock, there's no shortage of excuses to do so.
Rich Smith 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.