The post-IPO boom phase for those red-hot shares of Space Exploration Technologies (NASDAQ:SPCX) didn’t seem to last very long, peaking at just north of $200 per share before plunging as low as the low-$150 levels, well below the day-one opening close. Indeed, if you didn’t buy on the first day of trading, patience was rewarded quite quickly. With shares a few dollars above where they were on day one, though, the big question is whether it still makes sense to buy before the stock is added to the Nasdaq 100.
Indeed, that S-1 prospectus was packed with profound innovations, some of which, at least in my humble opinion, are quite ambitious and could take many years longer than excited investors expect. Indeed, orbital data centers aren’t going to happen overnight. And questions linger as to whether the model is practical enough to evolve into a profitable business anytime soon.
SpaceX is full of promise, but the premium bakes in a lot
As for asteroid mining, who knows when that will be a thing? In many ways, a big bet on SpaceX shares requires a big leap of faith and utmost confidence in Elon Musk. There’s no shortage of people who’ve been more than willing to pay up in the first week of trading.
As the Nasdaq 100 starts buying while insiders get ready to offload their positions in a few months, investors had better be prepared for extreme levels of volatility in both directions. At this juncture, it’s not hard to imagine that many investors have already piled into the stock with the expectation that the Nasdaq 100 will need to start loading up at market prices.
Add the limited float that’s trading around, and I do think that patience is the best move when it comes to SpaceX. In due time, more shares will be made available, and my guess is that the initial glimmer from that packed S-1 prospectus will begin to fade, as focus shifts from what’s possible to the challenges facing the firm in the present moment.
Will AI CapEx jitters weigh down SpaceX shares?
Indeed, AI-related CapEx has not been taken well by the market of late. And as we gain more clarity into the trajectory of the financial situation, I do think that there’s more than enough fuel for a correction to IPO prices of $135 per share. Who knows? Maybe a Fed rate hike or two could be enough for investors to fall out of love with some of the market’s most expensive, growthy tech stocks, including the likes of SpaceX.
For long-term thinkers who just have to have a piece of SpaceX in year one, I do think that the moment to pounce has a pretty high chance of arising at some point in the second half. Any way you look at it, 104.0 times price-to-sales (P/S) is a ridiculously high price to pay for any stock, including one with unbounded ambitions. My worry is that the market might start souring on SpaceX shares once we learn more about how much CapEx will be in the cards in the years to come.
Indeed, SpaceX is serious about being a combatant in the AI wars. And the price to play is, indeed, steep. AI data centers do not come cheap, and SpaceX is the only firm that’s building on the ground and up in the sky, where the costs could be astronomical (no pun intended).
The bottom line
While I do find SpaceX to be a profoundly ambitious company with invaluable, unique assets and a wide moat, I just can’t justify the valuation. Once more shares trade hands and the price of admission cools off a bit, I might give the name a second look. But, for now, I’m in no rush to buy at over $160 per share.
Though I do understand why some would want to initiate a starter position right here, given the FOMO (fear of missing out) and the potential for the firm to enter some sort of growth inflection point if Elon Musk’s ambitious projections do prove realistic.
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