Key Points
-
Most of Tesla’s gains in its first decade were made in its latter years.
-
Space Exploration Technologies’ high IPO valuation could limit some of its upside, as much of the growth is already priced in.
-
SpaceX is going beyond just being a space launch company and into a conglomerate.
- 10 stocks we like better than Space Exploration Technologies ›
There’s a strong case to be made that no company has received as much hype entering the market as Space Exploration Technologies (NASDAQ: SPCX) SpaceX accomplished the largest initial public offering (IPO) in history and captivated a base of Elon Musk enthusiasts and loyalists.
Because of the Musk connection, people have been using Tesla‘s (NASDAQ: TSLA) performance as a benchmark for what could be possible for SpaceX. Tesla’s stock has struggled this year (down 12% as of the time of writing), but it has produced generational gains since its June 2010 IPO.
A $1,000 investment in Tesla 10 years ago would be worth around $27,400 today — impressive to say the least. Can SpaceX duplicate those results over the next decade? Let’s take a look.
The vision for SpaceX as a company
At its core, SpaceX is a rocket launch company. That’s what it was founded on, and that continues to be its foundation, but it’s spreading its wings beyond just that. It offers Starlink — a leading global broadband provider — and, after acquiring xAI (the parent company of X, formerly Twitter), has become a respectable player in AI infrastructure.
That’s where SpaceX stands today, but as with Tesla, the main appeal is the long-term ambitions it continues to sell to investors. The two ambitions most consistently discussed are putting data centers in space and achieving a multiplanetary civilization (i.e., humans living on Mars).
Neither of those is something I would expect to happen in the next decade (especially a multiplanetary civilization), but the trend for Musk and Tesla has been to sell the dream and vision and buy time with investors. Tangible progress in space data centers will be a must, though.
What are the chances that SpaceX has a Tesla-like run?
SpaceX’s stock increasing by over 2,600% over the next decade would be quite the feat, but it would mean averaging 39% in annual returns over that period. That’s far from an easy task, but we’ve seen it done before. In fact, Tesla’s stock jumped over 6,100% in its first decade on the market.
We can’t predict how any stock will perform, so there are no guarantees. However, if SpaceX were to make it happen, I’d imagine the bulk of those gains would come in the latter half of the decade. Mega-IPOs have a history of underperforming the market in the first few years after listing, and I see SpaceX following a similar path.
I wouldn’t invest in SpaceX expecting it to replicate Tesla’s run, since it began trading at a much higher valuation than Tesla, which could limit upside. Invest because you believe in the long-term vision, but there’s no rush to do so right now. I’d wait until the IPO mania has cooled a bit before purchasing shares.
Should you buy stock in Space Exploration Technologies right now?
Before you buy stock in Space Exploration Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Space Exploration Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $410,833!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,208,693!*
Now, it’s worth noting Stock Advisor’s total average return is 917% — a market-crushing outperformance compared to 209% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
