SpaceX (NASDAQ:SPCX) shares remain the hottest attraction on the global stock market. British investors might not be liking the current heatwave, but they can’t get enough of the rocket maker’s fiery growth potential.
Space Exploration Technologies — to give it its full title — traded at $135 when it floated on the stock market in June. This gave it a valuation of $1.78trn. Today SpaceX’s share price is $144.10, boosting its market cap to almost £2trn.
That 7% rise is a tasty reward for early buyers of SpaceX shares. But here’s the thing: City analysts are in broad agreement that Elon Musk’s space company is still too cheap!
So what do they think it’ll be trading at a year from now? And what could a £9,999 lump sum investment become by next July?
A 37% growth opportunity?
Analysts don’t always get it right. However, a large and balanced range of opinions can be a valuable guide as to where a stock might be going.
With SpaceX, there are currently 16 brokers predicting where its shares might be heading. Therefore, current price forecasts are built on solid foundations, at least in my view.
And for SpaceX investors, things might be looking extremely good. Why? The average share price estimate among these 16 analysts today is $197.40 per share. That suggests a further 37% increase in SpaceX’s share price over the next year, even after its strong start since IPO.
If correct, a £9,999 investment today would turn into £13,698 a year from now.
The case for… and against
So what could power SpaceX shares to these heights? Potential drivers include:
- Rapid growth in subscriptions to Starlink, the company’s satellite internet service.
- Fresh US government contracts (like the SpaceX Starshield military and intelligence programme).
- Successful rollout of its next-generation Starlink Mobile V2 satellites from next year.
- Progress towards doubling launch payload capacity to 200 tonnes.
- A growing role in AI infrastructure.
But the path higher is far from guaranteed. And SpaceX faces significant risks that could block its path to $197.40. These include:
- Launch failures and project development issues.
- Growing competition, such as from space technology rival Blue Origin and Amazon‘s satellite internet operator Leo.
- Capital expenditure that grows faster than revenues.
- Sensitivity to public controversies and management approach of Elon Musk.
- Increasing operational and regulatory risks as the number of orbiting satellites grows.
Are SpaceX shares a buy?
SpaceX has huge investment potential as one of the world’s most ambitious technology companies. But I have a big problem with the stock today. It’s that enormous valuation: at $145.30 per share, the company’s price-to-sales (P/S) ratio is an eye-watering 112 times.
That’s in a different galaxy to the broader NASDAQ index’s 6-7 times. At these levels, my main concern would be whether SpaceX’s share price might crash if news around the company weakens even slightly. Whether it can rise 30% as analysts expect would be at the back of my mind.
I might look at SpaceX shares if they come back down to earth. But at the moment, they’re far too expensive for my liking. I’d rather find other less risky tech stocks to buy.
Should you invest £5,000 in Space Exploration Technologies Corp. - Class A right now?
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Royston Wild does not hold any positions in the companies mentioned.
