Key Points
One of the stocks investors are most excited about right now is Space Exploration Technologies (NASDAQ: SPCX). The artificial intelligence (AI) and space stock has caught investors’ imagination about what the future could hold. With $5,160, you can buy 30 shares.
SpaceX offers a combination of substantial near-term and long-term opportunities. In the near term, the company has become one of the premier ways to play the cloud computing market. By acting as a bridge provider, renting out compute capacity on a short-term basis, SpaceX is getting superior economic returns. While it takes Amazon two to three years to break even on its chip and network investments, SpaceX is getting a payback in one year.
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Expect this to be the company’s biggest revenue growth driver during the next three years. It’s already set to potentially more than double the graphics processing units (GPUs) used by its Colossus 2 AI chip cluster, and it recently agreed to rent out $1.1 billion a month in compute capacity to an unnamed customer. Meanwhile, Anthropic recently revealed that it has agreed to lease $1.25 billion a month in computing power from SpaceX over the next three years. In addition to AI infrastructure, SpaceX should see solid growth from both its satellite internet service, Starlink, and its recently acquired AI coding platform, Cursor.
A SpaceX investment is more about the growth it will see in the next three years, though. The company has some huge potential long-term opportunities associated with its space business. Chief among these are data centers in space, which would solve the big energy consumption issues related to AI infrastructure. It is also looking to create new industries, such as terrestrial cargo transport and asteroid mining. If SpaceX can transform Starship into a fully reusable rocket, it will drastically lower launch costs and make these projects much more economically viable.
Image source: The Motley Fool.
What a $5,000 investment could be worth in three years
SpaceX is a unique stock that undoubtedly will trade at a premium due to the promise it holds. However, I think one of the best ways to value the stock in the near to medium term is to use past price-to-sales (P/S) multiples of Tesla when it was still in its early stages as a public company. A couple of years after Tesla went public, in late 2011, it was trading at a P/S of about 12.
The current analyst average revenue forecast for SpaceX is that it will generate $293.9 billion in revenue in 2029, and at the end of last quarter, it had roughly 13.2 billion shares outstanding. That could prove low, and the highest analyst estimate for that year is about $465 billion. Place a P/S multiple of 12 on the stock based on the average estimate, and it would trade at about $267, or more than 50% higher than today. At the high end of the estimates, it would trade at about $423.
However, let’s assume that in three years, investors start looking a couple more years out toward 2031 revenue estimates, given the company’s huge expected revenue growth. Place an 8 times forward P/S multiple on the $829.1 billion 2031 revenue forecasts, and the stock would be worth $502 in 2029. Meanwhile, at the high end of 2031 estimates (more than $1.1 trillion in revenue), it would trade near $675.
Taken altogether, that values the stock at a wide range between $267 and $675 in the next three years. At the low end, a $5,160 investment would be worth about $8,000, while at the high end it would be worth $20,250. If we take the midpoint, the stock would trade at about $470, good for about a 275% gain, and a $5,000 investment would be worth around $14,000.
The next few years for SpaceX are going to be all about revenue growth and execution, as well as what valuation multiple the stock can command. That said, SpaceX has the potential to be a huge performer over the next three years.
Should you buy stock in Space Exploration Technologies right now?
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Geoffrey Seiler has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.
