If the Market Crashes, This Is the 1 Space Stock I Can't Wait to Buy
Key Points
SpaceX's reusable rockets changed the game, and its Falcon 9 is by far the most-used launch vehicle in the U.S.
This enables it to launch and maintain a mega satellite constellation called Starlink, a major driver of earnings.
SpaceX's heavy investment in Starship and AI infrastructure produced more than $2 billion in first-half losses.
With energy prices rising alongside interest rates, investors are growing concerned about a potential market crash. Sell-offs are a normal part of investing and create opportunities for patient, long-term investors.
If a market crash is on the horizon, one space stock I've been watching is Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX. The stock has been highly volatile since going public in June, but if the market crashes and takes SpaceX down with it, I'll be adding shares.
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Here's why.
SpaceX's expansive business is racking up massive expenses
SpaceX ushered in a new era of space exploration with its reusable rockets and vertically integrated business. By reusing rockets, SpaceX has drastically reduced launch costs. It can also complete several launches in succession, which was unheard of with previous launch technologies.
Thanks to SpaceX's reusable Falcon 9 launch vehicle, the company has built a mega-constellation of satellites in low Earth orbit (LEO) and offers customers internet from space through Starlink. Starlink (along with other satellite connectivity services) are currently SpaceX's main moneymaker. In the first half of this year, this segment generated $7.55 billion in revenue and $2.84 billion in generally accepted accounting principles (GAAP) operating income.
Image source: Getty Images.
SpaceX's other businesses are significant but have driven huge losses for the company. Its space segment, which includes launch services, generated $1.58 billion in revenue but had an operating loss of $1.2 billion. This is largely driven by high research and development (R&D) costs around its Starship vehicle and Starbase infrastructure.
Meanwhile, its AI segment has been a real drag on near-term earnings. Over six months, the segment has generated $3.38 billion in revenue while posting an operating loss of $3.73 billion. This comes as SpaceX aggressively scales its compute capacity, resulting in high upfront research and development and infrastructure expenses.
Here's why I'd buy any dips in SpaceX
In the first half of the year, SpaceX lost over $2 billion as it spent heavily on R&D and invested in building out its Starship and AI infrastructure. SpaceX stock is not cheap by any means, trading at about 94 times sales as investors price in very strong growth going forward.
With that said, the bull case is compelling. Starship rockets will be fully reusable, which could drive launch costs down even further. It also has a massive payload capacity, over 6 times that of the Falcon 9. In addition, SpaceX is rolling out the next generation of Starlink satellites and is leveraging its satellite constellation to score U.S. national security and defense contracts through Starshield.
SpaceX is a volatile stock with massive capital needs, making it a higher-risk investment today. However, if the market declines meaningfully from here and takes SpaceX down with it, I'd buy the stock, given the long-term bullish outlook for the space economy over the coming decades.
Courtney Carlsen 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.