SpaceX faces its biggest test since its blockbuster IPO as investors await the company’s first quarterly earnings report. After soaring in its trading debut, the stock has lost nearly half its peak value amid concerns over lofty valuations, mounting losses and heavy spending. The results, along with management’s outlook on AI, Starlink and space ambitions, could determine whether investor confidence rebounds or weakens further.
A look back at SpaceX IPO
Elon Musk’s satellite, space, and artificial intelligence company went public at $135 per share in June.
The shares have been on a roller coaster ride ever since, shooting up to $225 in the first days of trading and then plunging below the offering price.
They closed Monday at $114.53, down 15% from the IPO and 49% from their high on June 16, erasing more than $1 trillion in market value from that peak.
SpaceX shares did rise 5.7% on Monday after tumbling 37% in July, and they’re up again early in Tuesday’s session, climbing 3.2% to roughly $118.
Earnings will give investors a chance to reassess the stock and the expectations for a bright future that have made analysts almost universally bullish on the company.
‘SpaceX is a very speculative business’
Despite its massive valuation, the problem is that SpaceX isn’t profitable and has a very speculative business at this point
“There is so much that’s in the future of the SpaceX story, so much that hasn’t been done yet, or ever, so there’s nothing to make you comfortable,” said Drew Cupps, portfolio manager and head of the 5Perspectives Growth Team investment group at Polen Capital, which owns a small position in the company.
“There’s not a lot of here and now. There’s no, look at last year to justify what you should pay now.”
“I have very little confidence in those estimates,” said Jim Lebenthal, chief market strategist at Cerity Partners. “I don’t mean this obnoxiously, but I think they’re mostly licking their fingers and sticking it in the wind.”
Wall Street expects SpaceX to report a loss of 24 cents per share in the second quarter on $6.8 billion of revenue. The results have been somewhat of a moving target, however, because so little information about the business is available. Analysts have widened their estimates for the company’s loss by 18% in the past month.
What will investors look at?
What investors and analysts will primarily be looking for are management’s comments on the company’s progress in AI, Starlink, and its rocket launch business.
“We don’t have concrete earnings power that would be analogous to other parts of the market, but we do have a visionary set of massively capable assets that are in some cases unrivalled over all others,” said Polen Capital’s Cupps.
Analysts are widely bullish
Even after the recent stock decline, most analysts remain positive about SpaceX’s long-term future. Of the 39 analysts tracked by Bloomberg, 30 recommend buying the stock. Most have also kept their optimistic price targets despite the sharp decline since the company’s IPO.
Raymond James analyst Brian Gesuale is sticking with his call for the shares to reach $800 within the next 12 months on exponential revenue growth. Adam Jonas at Morgan Stanley recently reiterated his $300 price target and said that shares trading at $100 values the company’s AI business at zero, making this an attractive entry point for investors.
