Since June’s IPO, SpaceX (NASDAQ:SPCX) stock has mirrored one of the company’s reusable rockets. It shot straight up to the heavens, peaked, then made a rapid decent back to earth.
In share price terms, it has gone from $225 in mid-June to just $118, as I write — a 47% decline!
But there’s a big potential catalyst on the horizon in the shape of SpaceX’s second quarter results on 4 August. If the numbers are strong, the market could reward the stock with another blast skywards. So is SpaceX worth a look with this key date on the horizon?
In the red
The short answer is that it could be. You see, with a stock like this, anything can trigger a surge, as we have seen with Tesla over the years.
For the second quarter, Wall Street analysts expect revenue of about $6.9bn, which would be a big increase on the $4.7bn reported in the first quarter. Adjusted EBITDA is also expected to be significantly ahead of last quarter’s $1.13bn.
If SpaceX can beat these figures, and provide a rosy full-year outlook, the share price could get a nice boost. After all, CEO Elon Musk is a master at keeping investors focused on the long-term potential rather than the present.
However, the fact that the company’s valued at $1.5trn but still prioritising adjusted EBITDA figures shows how overvalued it is today. Operating profit, net income and earnings per share are all, fittingly, the colour of the Red Planet.
Another issue worth bearing in mind is that early investor and employee lockup restrictions will start expiring after the second quarter. Around 911.5m shares will become available for trading at this point.
This could put more downwards pressure on the share price.
What does Wall Street reckon?
Analysts are currently split on where they think the stock will be next summer. One broker has it as high as $800, while another sees it remaining grounded around the $115 mark. Still, the average price target is $236, which is 100% higher than the current level.
However, considering the sky-high starting valuation today, I would be surprised to see SpaceX reach that price by next summer. But I wouldn’t be shocked given the speculative nature of the stock.
Worth a punt?
Due to the eye-watering valuation, ongoing losses, and potential pressure on the share price from the forthcoming lockup expiry, I’m not convinced now is the best time to consider investing. The risk/reward setup still doesn’t look favourable to me.
In my experience, there’s usually a far better opportunity to invest in a hyped-up IPO at a later date. Look at Airbnb, which went public in late 2020 and closed its first day at $144. One year later, it was as low as $85.
I think SpaceX will be a similar story. Looking ahead, I’m confident that I’ll be available to invest in the space giant at a much more favourable valuation.
Therefore, I’m happy to play the long game and wait for my opportunity to start accumulating shares. Because without doubt, SpaceX has huge growth potential due to its monopolistic positions in both rocket launches and satellite internet.
Should you invest £5,000 in SpaceX right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if SpaceX made the list?
Ben McPoland has no position in any of the companies mentioned.
