Space Exploration Technologies (SPCX) has seen its stock price surge 58% since its initial public offering (IPO), prompting retail investors to evaluate whether to invest now or wait for the initial trading frenzy to subside.
The company’s stock experienced a strong debut, climbing 19% on its first day of trading after being priced at $135 per share. This upward momentum continued, leading to the significant increase from the offering price.
Beyond Current Operations
While the current underlying business might not fully justify the stock’s valuation, investors appear to be focusing on SpaceX’s future potential, a strategy that has also characterized investment in Elon Musk’s Tesla. This focus has positioned SpaceX as a momentum stock in its early weeks of trading.
SpaceX holds a dominant position in the commercial space launch market, accounting for 80% of U.S. launches last year, according to research from The Motley Fool. However, significant profit outlooks are also tied to its Starlink satellite internet service and its xAI artificial intelligence segment. The company has reportedly made a $60 billion acquisition of Cursor to bolster its xAI endeavors and advance its AI coding capabilities.
The substantial market potential for both Starlink and xAI is leading investors to look past immediate valuation fundamentals. This situation draws parallels to Tesla, whose stock has historically traded on the future prospects of robotics, autonomous vehicles, and energy storage, rather than solely on its electric vehicle sales, and has experienced considerable volatility.
Potential for Volatility and Long-Term Opportunity
The trajectory for SpaceX stock may follow a similar pattern to Tesla’s, potentially offering opportunities for long-term investors to enter the market at a lower price point after the initial hype has diminished. This outlook is based on the expectation that the full realization of profits from its newer ventures is still some years away.
Elon Musk has expressed optimism about the company’s future revenue, stating his belief that SpaceX could generate $1 trillion in revenue by 2030, and potentially more in 2031. Investors who missed early gains in momentum stocks like Nvidia in 2009, which later saw significant growth, may view SpaceX as a similar opportunity, though a “Total Conviction” signal, previously seen for Nvidia, is now flashing for a much smaller company.
For momentum traders, buying into SpaceX stock now, despite its early rise, might be appealing. However, long-term investors might consider a strategy similar to that used for Tesla, which saw its stock price fluctuate significantly. Tesla’s shares reached over $400 in late 2021 and early 2022 before dropping below $120 a year later, providing opportunities to purchase shares at a lower cost basis even after an initial surge.
Norman Pearlstine is the Chief Editor of News Raise and focuses on Business news. His responsibility is to oversee the editorial content including business, commodities, personal investments and the stock market.
