I’ve got cash to deploy in my Stocks and Shares ISA right now and I’m wondering if it’s time to have a nibble at space stocks SpaceX (NASDAQ: SPCX) and Rocket Lab (NASDAQ: RKLB). Both are light-years off their highs – the former is down roughly 49% while the latter is down around 57%.
SpaceX has a huge AI opportunity
At a share price of $115, SpaceX is certainly starting to look tempting. At that price, its market-cap is now ‘only’ $1.5trn.
Obviously, that’s still really high. But taking a long-term view, the company could grow into that valuation over time – next year sales are projected to rise 88% year on year to $73.7bn.
One growth driver could be artificial intelligence (AI). If the company can keep landing big AI compute contracts with firms like Google and Anthropic, its revenues could skyrocket.
Note that in its IPO prospectus, SpaceX said that it sees its total addressable market (TAM) on the AI side of the business as worth up to $26.5trn, so it clearly sees a lot of potential here. I’m taking that projected TAM with a grain of salt however – it looks a little optimistic.
My main concern with SpaceX though is that we could see further share price weakness before a move higher. Because right now, sentiment’s really weak and many traders are betting against the stock.
Meanwhile, insiders and long-term investors will shortly be able to sell shares. This could put further pressure on the share price.
Given this weak sentiment and the approaching lockup expirations, I’m going to hold off on buying SpaceX stock for now. I’m watching the stock closely though – if it continues to fall I may initiate a small position.
Rocket Lab looks interesting
Turning to Rocket Lab, it looks interesting to me at $64. Because whereas SpaceX has the aforementioned market-cap of $1.5trn, this company’s only worth $38bn. In other words, it’s a fraction of the size of Elon Musk’s business. At that market-cap, there’s plenty of room for growth in the long run.
What I like about this company is that it’s diversified in nature. Not only does it offer launch services but it has also built out a comprehensive spacecraft components business.
I also like the fact that it has proven technology. To date, it has completed over 90 orbital launches with its Electron rockets.
In terms of its financials, its top line is growing quickly. This year and next, revenue is expected to hit $917m and $1,284m versus $602m in 2025. There are no profits though and this increases risk.
The valuation also adds risk. Currently, the company’s price-to-sales ratio using next year’s projected sales figure is around 30 (versus 20 for SpaceX).
Given the valuation, I’m not in a rush to buy the stock right now. But if it keeps falling, I may snap up a few shares and tuck them away for the long run.
Should you invest £5,000 in SpaceX right now?
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Edward Sheldon does not hold any positions in the companies mentioned
