Key Points
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Elon Musk’s Space Exploration Technologies (SpaceX) went public in June, and it has already lost 40% of its peak value.
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Its stock remains expensive despite the decline, so investors can probably find better value elsewhere.
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Microsoft is making strides in the enterprise artificial intelligence race, and its stock looks attractively valued right now.
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Elon Musk founded Space Exploration Technologies (NASDAQ: SPCX) in 2002 to drive down the cost of space exploration, but the company has since expanded into the satellite internet connectivity and artificial intelligence (AI) infrastructure businesses. SpaceX went public in June, and while its stock quickly soared to a high of $225, it has since lost 40% of its value (as of the market close on Nov. 6).
But SpaceX still has a hefty market capitalization of $1.8 trillion. The company has generated just $32 billion in revenue over the last four quarters, so its stock is trading at a hefty price-to-sales (P/S) ratio of 56.8, making it almost 10 times as expensive as the technology-heavy Nasdaq-100 index.
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As a result, more downside might be ahead, which is why if I had $1,000 to invest today, I’d probably look elsewhere. Here’s why Microsoft (NASDAQ: MSFT) could be a better buy for the long term.
Microsoft’s enterprise AI efforts are paying off
AI labs like OpenAI and Anthropic have built some of the world’s most powerful AI models, but their long-term success will be determined by how many enterprise customers they can attract, because businesses typically spend far more on software than consumers.
Microsoft has a distinct advantage over those start-ups, because it owns legacy platforms like the Windows operating system, Edge internet browser, and 365 productivity suite (Word, Excel, Outlook, and more). Windows alone has over 1.6 billion active users, so the company has an enormous existing customer base to which it can market its AI products. Copilot is Microsoft’s flagship AI assistant, but in September, the company expanded it to become an entire AI operating system.
The new Copilot aggregates all of its previous capabilities, placing it at the center of the entire enterprise experience. From a single home screen, users can now ask the assistant to draft a document or build a presentation, using context from recent meetings or email chains. Moreover, Copilot Code allows practically any employee to create an app or a piece of software, even if they have limited technical expertise.
During Microsoft’s recent fiscal 2027 first quarter (ended Sept. 30), Copilot’s daily active users soared fivefold year over year, and the number of enterprise customers paying for at least 50,000 licenses for their employees jumped eightfold. Simply put, Microsoft is at the front of the enterprise AI race.
But then there is the Azure cloud platform, which offers hundreds of services enterprises need to thrive in the digital age. It’s also home to Foundry, where businesses can access the data center capacity, ready-made foundation models, and other tools they need to develop and run their own AI software.
Azure’s revenue increased by 48% year over year during the third quarter, and it was the third-straight period in which that growth rate accelerated. That included Foundry revenue, which more than tripled — and it’s still in the early stages of adoption with just 120,000 customers so far.
Microsoft stock looks cheap compared to SpaceX
Microsoft stock is trading at a P/S ratio of 11.4, so while it’s more expensive than the Nasdaq-100 which has a P/S ratio of 5.9, it’s substantially cheaper than SpaceX. Moreover, Microsoft is highly profitable, so we can also value its stock using the more traditional price-to-earnings (P/E) ratio.
Based on the company’s trailing 12-month earnings of $19.15 per share, its stock is trading at a P/E ratio of just 27.7, which is below its 10-year average of 32.2.
MSFT PE Ratio data by YCharts
As a result, even though Microsoft is trading near an all-time high, it still looks like a more attractive buy than SpaceX based on valuation alone. It’s worth pointing out that Elon Musk has put forward some ambitious forecasts, suggesting SpaceX could reach somewhere between $500 billion and $1 trillion in annualized revenue by the end of 2027, which makes the stock look like a bargain on a forward basis.
SpaceX’s annualized revenue was $58.3 billion in the recent September quarter, so generating up to seventeen-fold growth in the space of a year will be no easy feat. Plus, Musk doesn’t have a perfect track record when it comes to offering guidance — after all, he has been promising fully unsupervised self-driving capabilities in Tesla‘s electric vehicles for over a decade, and most customers are still waiting.
Therefore, if I had $1,000 to invest today, I think Microsoft stock would be the safer long-term buy.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Space Exploration Technologies, and Tesla. The Motley Fool has a disclosure policy.
