Few companies in history have been valued at $3 trillion. None did so while generating less annual revenue than a middling member of the S&P 500.
When it comes to Elon Musk’s SpaceX, however, the old valuation rules don’t apply. At $1.75 trillion, SpaceX was already being priced for a spectacular future, but the push towards $3 trillion within days of its market debut implies a storyline more at home in science fiction than in financial statements.
At $2.97 trillion, SpaceX briefly overtook Microsoft and Amazon to become the world’s fourth-most valuable company.
To put that in perspective, Creative Planning strategist Charlie Bilello notes that over the past year, Amazon generated $91 billion in net income on $743 billion in sales.
Microsoft generated $125 billion in net income on $318 billion in sales.
And SpaceX?
A $9 billion net loss on $19 billion in sales. “Investors are valuing SpaceX stock as if its incredible future has already happened”, cautioned Bilello.
Trading at more than 150 times sales, there’s “simply no margin for error in a world where there’s always some error”.
That scepticism is shared by CFRA’s Keith Snyder, who said he couldn’t justify SpaceX’s valuation even after factoring in “almost comical growth for AI”. One Swissquote Bank analyst was similarly blunt, saying the valuation “makes absolutely no sense”, with purchases driven less by fundamentals than by the hope of passing the parcel at a higher valuation.
Of course, all this talk of fundamentals and price-sales ratios means nothing to the Musk devotees and retail investors clamouring to get in on the action.
Vanda Research notes ordinary investors bought as much SpaceX stock in the first two days of trading as they did across the entire US market in a week.
One is tempted to finger-wag and say this won’t end well. Still, while SpaceX shares subsequently retreated, timing anything orbiting Musk has never been straightforward.
Stories and promises have sustained Tesla’s bizarre valuation for years, and the same faith-based investing appears to be carrying over into SpaceX.
