Investors may find themselves wondering how to approach investing in Space Exploration Technologies (NASDAQ: SPCX). CEO Elon Musk’s successes with PayPal and Tesla have shown him to be one of the best technologists and businessmen of the age, but the nature of SpaceX’s business and the premium on its stock make the value proposition more challenging to gauge.
So, should investors treat it as a buy or as a trap?
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The positioning of SpaceX stock
Admittedly, SpaceX stock comes with plenty of concerns, even before one considers the fact that the company this year acquired money-losing enterprises such as X (formerly Twitter) and xAI.
The main problem with the stock is how the IPO appeared to favor insiders over average investors. Unlike companies in the past, which were more likely to go public earlier in their growth arcs, Musk waited so long to take SpaceX public that when he did, it was one of the 10 largest companies by market cap in the U.S., denying retail investors an opportunity to participate in years of its growth.
This stands in contrast to Tesla, which is up more than 23,000% since its IPO. Despite those gains, Tesla’s market cap is about $1.45 trillion, well under SpaceX’s $2.02 trillion.
Moreover, SpaceX’s price-to-sales (P/S) ratio is 95, far above the S&P 500‘s average of 4. That valuation allows insiders and early investors to sell SpaceX stock at a tremendous profit.
Even the most prominent growth stocks rarely have P/S ratios above 30. Thus, buying at SpaceX at its current lofty level looks increasingly risky.
Another challenge for average investors is the lockup expiration schedule. When companies go public, it is standard practice for pre-IPO investors’ shares to be locked up for a time, forcing them to wait before selling. As those lockup periods expire, the supply of shares available for new investors to buy increases.
Naturally, that shift in the supply-and-demand dynamic tends to put downward pressure on share prices. Unfortunately for investors, numerous additional lockup expirations will occur between mid-September and mid-2027. The resulting increase in the float of SpaceX stock could become a headwind for its price.
Despite those challenges, investors have good reasons to seek opportune moments to pick up shares of SpaceX. The company dominates the space launch industry, creating business opportunities for both government and private enterprises.
