The Space Exploration Technologies (NASDAQ:SPCX), or SpaceX, share price has been on quite a volatile journey since going public earlier this year. The US growth stock reached an all-time high of $225.64 per share, only to then collapse by half before rallying earlier this month back up close to its IPO price of $135.
Seeing some extreme volatility after an IPO is nothing unusual, especially for a business trading at an exceptionally frothy valuation. But seeing a near-30% rally following such a steep sell-off is a bit less common. So what’s behind this sudden surge? And could SpaceX shares return to $225 later this year?
What’s fuelling the rebound?
The catalyst behind the recent growth spurt is the company’s first quarterly earnings report. And it gave investors plenty to chew on. Revenue jumped a staggering 92% year-on-year to $7.81bn, comfortably beating analyst expectations of $6.93bn, while the net loss narrowed sharply to $541m from roughly $1bn a year earlier.
In fact, every segment beat analyst forecasts. Starlink grew connectivity revenue 66% to $4.29bn as subscribers doubled to 12 million. A total of 38 rocket launches were completed, generating $962m in revenue versus $746m over the same period a year ago. And its newly-acquired AI division saw revenues more than triple, from $737m to $2,561m year on year.
As such, institutional analysts have been revising their forecasts, with consensus pointing towards full-year revenues of $43.9bn. And comparing that against its current market-cap of $1.76trn, that places the forward price-to-sales ratio at 40.1.
That’s still a very rich valuation, but it’s far more defensible than the 100 times sales ratio the stock was trading for earlier this year. And with excitement surrounding surging growth, it’s no wonder the stock has started to rebound.
Will the momentum continue?
Capital expenditures are rising rapidly as SpaceX seeks to build out its AI business, coming in at a staggering $18.4bn for the quarter against expectations of $13bn. And with more spending on the horizon, profits from its Starlink business are being entirely drowned out.
Nevertheless, Morgan Stanley analyst Adam Jonas has remained one of the most vocal bulls throughout this volatility, reiterating his $300 price target even through the lock-up-driven sell-off, arguing the stock is “uniquely positioned across launch, connectivity, and AI”.
That certainly suggests a recovery rally to $225 per share could be on the horizon. However, it’s worth highlighting that not everyone is convinced, with most citing the aggressive capital expenditure as a reason for caution. After all, this segment has yet to prove it can turn a profit.
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