SpaceX Is Down 19% From Its IPO Price. Tesla's History Suggests This May Happen Next
SpaceX stock is down 19% from its IPO price, prompting a comparison with Tesla's post-IPO performance. While Tesla rebounded after an initial decline, SpaceX faces headwinds including inconsistent profitability and slower revenue growth despite promising developments like the Starship rocket. The author predicts continued stock drops over the next year due to these risks and competition, though long-term opportunities remain significant.
Space Exploration Technologies (SPCX -3.41%) made history in June when it completed the largest IPO in history. It's been a wild ride for the space company since then. It opened at $150, meaningfully up from its IPO price of $135, and rose to as high as $225 in the following weeks. However, the stock has been mostly southbound recently, and at $109 as of writing, it is down 19% from its IPO price. Where will the stock go from here? Perhaps we can get a clue by looking at Tesla's (TSLA +0.76%) first year on the market. The other publicly traded corporation headed by Elon Musk bears some similarities to SpaceX. Let's dig in.
Image source: The Motley Fool.
Can SpaceX rebound like Tesla?
SpaceX took on the challenge of revolutionizing space travel. It used to be extremely difficult and expensive due to the use of disposable rockets. The company pioneered reusable rockets and helped significantly reduce launch costs. Now, it is the largest player in the field and continues to innovate. SpaceX is also deeply vertically integrated, which helps the company control costs. Tesla similarly moved the electric vehicle (EV) market forward through its vertically integrated approach, innovative battery technology, and EVs that could perform just as well as gas-powered cars. Tesla went public on June 29, 2010, and about two months into its life as a publicly traded company, the stock had declined by 18%.
TSLA data by YCharts
However, Tesla rebounded and had a respectable first year on the market, gaining 18% by the end of it, partly because of the company's plans to go beyond its first car, the Roadster -- a sports vehicle -- and to move into the mass-market category with the Model S, which it introduced in 2012. Can SpaceX also rebound and perform well through its first year on the market?
NASDAQ: TSLA
Key Data Points
On the one hand, the space company is working on projects that should give investors confidence about the future. SpaceX's next-gen rocket, Starship, is fully reusable and can handle much bigger payloads than its current crown jewel, Falcon 9. That means lower per-launch costs, enabling the company to improve margins and profits. It will also help it launch far more satellites into orbit and expand its Starlink business, which provides internet connectivity via a network of satellites in Low Earth Orbit. Starship is still in testing and recently completed its 13th test flight.
Progress on this front could be a meaningful catalyst for SpaceX over the next year, potentially allowing the company to rebound and follow a trajectory similar to Tesla's post-IPO journey.
NASDAQ: SPCX
Key Data Points
However, the company has several things working against it. SpaceX is not consistently profitable. Also, its revenue isn't growing as fast as one might expect for a corporation worth $1.4 trillion, and with heavy investments in artificial intelligence, its bottom line could sink even further into the red. That's to say nothing of mounting competition. The market is still pricing SpaceX as a technology-disruption story without factoring in these and other risks. In my view, the stock will continue dropping over the next year. Will SpaceX be worth investing in then? That depends on how much it declines, and on whether it can make significant progress with Starship. The stock is definitely worth keeping an eye on, though, considering the vast opportunities it boasts across several highly lucrative industries.
