One stock that has divided investors since its debut in June is Space Exploration Technologies (NASDAQ: SPCX). The Elon Musk-backed company had the largest IPO ever, and the stock has been volatile ever since, shooting up to over $225, then crashing to under $105 before settling in around its current price of roughly $135.
Let’s dig into why this growth stock could skyrocket higher and also why it could eventually crash.
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The bull case
SpaceX is a bet on the future and the vision of Elon Musk, who isn’t afraid to make big, bold bets, and SpaceX has become his primary vehicle for that. Eventually, I would expect the company to acquire Tesla to put all his ambitions under one roof.
Perhaps the most important technological achievement the company has attained thus far is building reusable rockets. This greatly reduces launch costs and sets the company up for its future space aspirations. It is now working to take this technology to its massive Starship rockets, which would then open the door to putting data centers in space.
This is a potentially huge market for the company, and data centers in space would offer several advantages. The biggest is that they can be run by nearly continuous solar power. AI data centers are energy hogs, and putting them in space would help solve this major issue. It also would avoid local grid congestion and zoning issues, while bypassing congested fiber lines in favor of high-speed satellite optical laser links that could quickly transmit data across regions.
SpaceX’s core terrestrial data center business currently has strong economics, with it saying it is getting a payback on its investments in less than a year. Meanwhile, its Starlink satellite internet business is a gem, giving it a strong recurring revenue business that is growing quickly. The company is also looking to potentially offer voice services to compete with traditional wireless carriers.
The biggest reason to own SpaceX, however, is the multitude of business opportunities it has and the industries it could disrupt.
The bear case
While SpaceX has a lot of opportunities in front of it, it will also have to overcome a lot of technical hurdles. The company still needs to solve a multitude of engineering problems with Starship, including heat shield durability and catching the upper stage of the rocket with its launch tower. Being able to catch an expensive rocket and relaunch it shortly afterward is really the key to its business model.
