Since its initial public offering (IPO) back in June, the hype surrounding Space Exploration Technologies (SPCX -1.36%) has taken a serious breather. After surging from its IPO price of $135 per share to prices topping $225 per share, this popular name among space stocks has since given back its gains, and then some.
Worse yet, even as SpaceX has fallen back to Earth following moonshot moves earlier this summer, don’t assume that shares in the Elon Musk-founded space exploration and artificial intelligence (AI) company have hit rock bottom. I think shares could fall by another 50% between now and Christmas for two key reasons.
Image source: Getty Images.
SpaceX’s valuation math doesn’t add up
Despite the recent pullback, SpaceX remains richly priced compared to its current operating performance. At around $110 per share, the company has a market cap of $1.45 trillion. Sell-side consensus calls for SpaceX to generate sales of $73.1 billion and earnings per share of $0.65 in 2027.
Space Exploration Technologies
Today’s Change
(-1.36%) $-1.57
Current Price
$113.50
Key Data Points
Market Cap
Day’s Range
$108.66 – $114.85
52wk Range
$108.66 – $225.64
Volume
259.3K
Avg Vol
122.4M
In other words, the stock currently trades for 19.8 times estimated 2027 sales, and around 169 times estimated 2027 earnings. I’m not the only one who believes this is a rich valuation for SpaceX. Recent research by Morningstar, using a discounted cash flow model, values the company at around $780 million, or less than half today’s market cap.
An upcoming trigger for a pullback
Even if SpaceX manages to live up to sky-high expectations, there’s another factor that could severely impact valuation in the months ahead. SpaceX’s float of 281 million shares makes up just 2.1% of the dilution-adjusted overall share count.
The vast majority of shares remain in the hands of insiders, including Musk, as well as pre-IPO investors. These investors remain subject to a series of lockup provisions. In the months ahead, these lockup provisions will gradually expire, with a large portion expiring on Dec. 8, 2026. As these lockups end, it could put greater pressure on the stock. With valuation still sky-high and a negative catalyst looming, keep an eye on SpaceX stock, but don’t buy it today.
Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.