Earnings · Economy 51
SpaceX ( SPCX +7.36% ) has been public for almost four months, and in that stretch its stock has closed above $200 exactly once. That was June 16, just its third session after the initial public offering (IPO) , when shares ended at $211.39. The stock hasn't been back since.
It sits near $151 as I write this, even after Starship, the company's huge next-generation rocket, completed its first orbital flight last week. Climbing back to $200 would take a rise of about 33%. My prediction is that SpaceX makes it before 2028.
And the case doesn't depend on investors paying more per dollar of sales than they do now. It depends on revenue. Image source: Getty Images.
The stock needs a third more revenue At around $151 a share, SpaceX has a market value of about $2 trillion, or about 65 times sales (using annualized second-quarter revenue). If this sales multiple doesn't change, the stock climbs only as fast as sales do. That means a $200 share price calls for a quarter of around $10.4 billion -- about a third more than the $7.8 billion SpaceX posted for the second quarter.
And with another five quarterly reports likely before 2027 ends, only one of them needs to clear that bar -- maybe as early as the next one. Recent numbers suggest it can. Growth is speeding up, with second-quarter revenue rising 92% year over year after first-quarter revenue of $4.7 billion grew just 15%.
Said another way, SpaceX added around $3.1 billion of quarterly revenue in one quarter. Hitting $10.4 billion takes about $2.6 billion more. Starlink alone could carry much of that load.
Revenue in the connectivity segment, home to the satellite internet service, rose 66% year over year to $4.3 billion, compared to $3.3 billion in the first quarter. Starlink finished June with 12 million subscribers, twice the number of a year before and up from 10.3 million at the end of March. Even if all other parts of SpaceX held steady, connectivity revenue would need to grow about 60% over the next five quarters for the company to reach $10.4 billion.
That pace is slower than the 66% the segment posted over the last four. SpaceX's target: a $100 billion run rate Management, of course, is aiming much higher. "We believe this puts us on a trajectory, including contribution from Cursor, to reach $100 billion of ARR, or annualized revenue run rate, by the end of this year," Bret Johnsen, SpaceX's CFO, said on the August call about second-quarter results.
He was pointing to $6.7 billion of newly contracted cloud services revenue (SpaceX renting out computing capacity at its artificial intelligence (AI) data centers) spread across a six-month period that starts ramping in October. These contracts add to earlier hosting deals that management said start to ramp later in the third quarter or in October. Cursor, the maker of an AI coding tool, is a company SpaceX finished buying in August.
A $100 billion run rate is around $25 billion per quarter, well over twice the $10.4 billion the forecast needs. Even missing that target by half would leave SpaceX comfortably above the bar. But the stock obviously isn't priced for the target.
A $2 trillion market value would be just around 20 times sales at a $100 billion run rate, suggesting investors are viewing the goal with lots of doubt. Today's Change ( 7.36 %) $ 10.89 Current Price $ 158.96 A forecast isn't a buy call Some of that doubt is fair. Much of the fastest-growing revenue depends on short commitments.
According to SpaceX's quarterly report, its cloud services agreements can usually be canceled by either side on 90 days' notice after an initial period ends. The spending behind that revenue, though, isn't going anywhere. SpaceX's capital expenditures were $18.4 billion in the second quarter, and $15.8 billion of it went to the AI segment.
If a big hosting customer leaves, the revenue could vanish within months while the data centers stay on the books, adding depreciation charges and deepening losses. I think that risk is the one most likely to hold the stock under $200 -- not necessarily because sales fall, but because the market could pay a lower sales multiple for revenue it trusts less. Still, I expect SpaceX to report a $10.4 billion quarter before 2028, and the stock to close above $200 again when it does.
But predicting a return to $200 isn't the same as calling the stock a bargain at around 65 times sales. I'd want to see a few of those hosting deals renew before paying that much for revenue that can leave on three months' notice.
Source: The Motley Fool
