SpaceX (NASDAQ:SPCX) is a name I’ve wanted in my Stocks and Shares ISA for ages now. And following the rocket, satellite, and AI company’s IPO in June, I now have the chance to invest.
Better still, the SpaceX share price has dipped 28% from its high of $225 last month. So, is this my perfect opportunity to load up? Let’s explore.
Lots of large numbers
As might be expected, SpaceX is growing quickly. Last year, revenue grew 33% to $18.7bn. Yet, despite this strong sales growth — boosted by its thriving Starlink satellite internet business — the firm also posted a hefty net loss of nearly $5bn.
However, the company today commands a $2.1trn market cap. This mega-valuation tells us that SpaceX is expected to deliver enormous future growth.
Were this not to happen, SpaceX may turn out to be one of the most overvalued stocks ever. To put the market cap into context, it’s roughly $600bn more than Facebook owner Meta, which generated $201bn in revenue last year (and a $60.5bn net profit).
That said, analysts do expect heady future growth. This year, the consensus is for around $36.5bn in revenue, which would represent roughly 95% growth. I’m seeing a forecast for $102bn in 2028, with a small profit to boot.
Things get a bit fuzzy further out, but CEO Elon Musk has mentioned hitting $1trn in annual revenue by 2030. Personally, I think that’s for the birds, especially when we consider many of his outlandish predictions at Tesla have not been met.
Then again, Musk operates with maniacal urgency — a concept called ‘Elon time’ — which means he has a relentless drive to get things done as soon as possible. He’s admitted the timelines are unrealistic, but the projects do get delivered, eventually.
A modern-day East India company?
Turning to some of these SpaceX projects/aims, they are quite simply otherworldly:
- A fully reusable Starship + Super Heavy launch system
- A 42,000+ satellite global internet mega-constellation
- AI computing infrastructure in orbit
- An interplanetary cargo shipping system
- Human cities on the Moon and Mars
In a recent Cambridge University study, Dr Alessio Terzi calculated that SpaceX’s 75%-80% market share of everything sent into space last year outdoes the English East India Company’s share of global tonnage shipped between Europe and Asia in 1820 (around 72%).
As such, the authors argue that the “market structure for access to space…has more in common with the chartered trading companies of the 17th century than with the competitive markets of economics textbooks“.
In other words, a single firm hasn’t held this much control over a strategic transport technology in 400 years.
Space X, the East India Company
and the political economy of space.
My decision
While this dominant market share rings alarm bells for these academics, I admit that it does sound very attractive from an investing standpoint. It indicates that SpaceX has a very wide economic moat.
But finding high-quality companies to invest in is only one part of the equation. The other is valuation, because even the best businesses can turn out to be lousy investments if I overpay. I learned this the hard way with Shopify.
Therefore, while I’m excited about SpaceX’s immense long-term potential, I’m avoiding the stock at the current price. It’s staying on the watch list.
Should you invest £5,000 in Space Exploration Technologies Corp. - Class A right now?
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Ben McPoland owns shares in Shopify.
