SpaceX is one stock I’ve been desperate to own in my ISA portfolio for many years. That’s because the rocket trailblazer ticks all the boxes I look for in a disruptive growth company.
For a start, SpaceX is operating in (and pioneering) a massive future growth industry. According to Morgan Stanley‘s estimates, the global space sector could be worth over $1trn a year by 2040. SpaceX puts it much higher.
Additionally, SpaceX is very dominant, accounting for more orbital launches (165) last year than all the rocket competition combined.
Meanwhile, its Starlink internet service is powered by over 10,000 satellites that form a mega-constellation. By contrast, Amazon‘s Leo has just a few hundred today.
SpaceX-backer Schiehallion Fund (LSE:MNTN) from the FTSE 250 recently wrote: “The company continues to exhibit arguably one of the strongest competitive advantages that we have ever seen“.
Another thing I look for is cutting-edge innovation. In the past, investing in companies that have innovation in their DNA has worked out well for me. It has led me to long-term winners including Nvidia, Intuitive Surgical and Axon Enterprise.
Without a doubt, SpaceX displays incredible innovation, most notably in reusable rockets, engine design, ‘chopsticks’ catch towers, and the gigantic next-generation Starship rocket (extraordinarily, it wants to colonise the Moon then Mars!).
Finally, SpaceX has incredible optionality. In other words, it has many different avenues of growth available, both now and potentially in the future.
These include:
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Commercial rocket launches.
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Starship.
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Starlink internet.
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Starshield (a version of Starlink for defence).
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Direct-to-cell (beaming internet directly to smartphones).
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Orbital data centres (AI infrastructure).
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Space tourism.
So will I invest?
Given all this, you’d think I’d be chomping at the bit to buy SpaceX stock in June when it goes public. However, there are a couple of things that put me off.
The first is the sheer size of the IPO. Whether SpaceX is going to be valued at $1.5trn or $2trn, I can’t help feeling I’ve missed the boat, and that nearly all of the gains have been made outside public markets.
To be honest, I feel like the poor boy being offered scraps after the private royal banquet!
This leads me on to another concern, which is valuation. Last year, SpaceX generated revenue of $18.7bn, with adjusted EBITDA of $6.6bn. But the firm’s net loss was almost $5bn due to heavy investments in AI infrastructure.
On a price-to-sales basis, that looks to be a monstrously high valuation. Due to this, I’m nowhere near as bullish as I used to be.