Key Points
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SpaceX completed the biggest IPO ever in June, raising $85 billion.
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The stock soared in the first days of trading but has since declined.
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Space Exploration Technologies (NASDAQ: SPCX) entered the market with a bang — and this is for a variety of reasons. First, the company’s initial public offering, completed in June, was the biggest ever, with SpaceX raising $85 billion after the exercise of an overallotment option. Second, SpaceX debuted with a market value of more than $2 trillion, instantly joining the ranks of tech giants such as Amazon and Nvidia. Those companies took years on the market to reach such market capitalization levels.
Finally, SpaceX’s combination of exciting businesses, along with the presence of Elon Musk at the helm, intrigued investors looking for the next big growth opportunity. All of this resulted in demand exceeding supply during the IPO, and the stock soared in its first few days of trading. But the path since that time hasn’t been as smooth. In fact, SpaceX stock has lost about 12% year-to-date.
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Still, SpaceX is in the early days of its growth story and has big ambitions. Could investing $500 a month in this stock help you retire a millionaire? Let’s find out.
SpaceX’s three businesses
SpaceX, as mentioned, has three businesses that have drawn the attention of investors looking for growth. These are space, the Starlink satellite-based connectivity unit, and artificial intelligence (AI) — SpaceX refers to this third business as super intelligence or SI.
One very interesting and positive element is that these businesses may help each other. For example, the space unit’s reusable rockets could launch equipment for the other two units. This happened just recently when the Starship rocket transported satellites to space for Starlink. By relying on its own strengths rather than depending on others, SpaceX can save on costs and have more control over its growth trajectory.
Speaking of growth, SpaceX is winning in this department. In the third quarter, revenue in its space, connectivity, and SI businesses rose 6%, 69%, and 829%, respectively. And total revenue climbed 161% to $14 billion. The company has set out major goals, from the development of completely reusable rockets to slash launch costs to the creation of data centers in space. This is a picture that growth investors like, and that’s one of the reasons the SpaceX IPO was so popular.
But investors have also worried about the risks involved in such businesses. SpaceX itself said in its prospectus that one of the risks is that some of its goals depend on technologies that haven’t yet been fully developed and certain initiatives “may not achieve commercial viability.” In such a scenario, SpaceX earnings and stock performance could suffer.
SpaceX’s capex surpasses revenue
Meanwhile, investors have also expressed concern about SpaceX’s capital spending to support its goals. In the recent quarter, capex soared 184% to $19 billion, surpassing the company’s revenue.
So, SpaceX is a company that offers potential for incredible growth, but risk remains high. Against this backdrop, could investing $500 per month help you retire a millionaire? This is a technique that is valuable with a stock or asset that offers you clear visibility and is somewhat predictable. A good example is an S&P 500 Index fund. The index has delivered an annual average return of 10% over time, suggesting we might expect a similar return in the future.
SpaceX is much more complicated. Considering the company’s mix of tremendous growth and significant risk, I would expect a certain degree of volatility in the years to come — at least until certain risks subside. In that context, adding regularly to build a huge position could be risky. Aggressive investors, as part of a diversified portfolio, might give it a try, and if SpaceX meets its goals, this technique could help these investors retire with millions.
But there may be an easier and less risky path to millions in retirement. That’s by investing in a wide variety of quality stocks across industries and potentially investing monthly in an S&P 500 index fund — and holding on for the long term.
Should you buy stock in Space Exploration Technologies right now?
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Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Space Exploration Technologies. The Motley Fool has a disclosure policy.
