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Investing in Space Exploration Technologies Corporation, or SpaceX (LSE: SPCX), was never going to be boring. Elon Musk has been accused of a lot of things, but never that.
The SpaceX share price went stratospheric after its record-breaking IPO on 12 June, and plunged back to earth just as quickly. Now it’s up again. On Friday (7 August) the shares rebounded 15.8% to $133, as investors took advantage of recent weakness and a more optimistic interest rate outlook.
This kind of volatility was always going to happen. We’re talking about a company whose ultimate mission is to develop human life on Mars. David Bowie sang about it, Musk is pursuing it.
Can Elon Musk build it?
Funnily enough, that’s not what investors are worried about right now. They’re mostly concerned about those boring old data centres. From a technical point of view, building AI infrastructure is easier than populating planets. But it costs a fortune.
Last week’s second-quarter results, published on 5 August, showed the group’s AI segment continues to swallow galaxies of cash. Quarterly capital expenditure was a thumping $18.4bn, smashing both expectations and the previous quarter’s $10.1bn. Some $15.8bn of that spend went on AI, around 86%.
The good news is that AI revenue tripled to $2.56bn. I’ll be watching these two numbers closely. Forget the space race. The real battle is whether the group can turn a profit before the capital spend crushes it.
Connectivity business Starlink is the only part of SpaceX making a profit, with revenue up 79.4% year on year to $1.66bn after doubling its global subscriber base to 12m.
Overall, SpaceX made a quarterly net loss of $541m, but that was down from $1bn in Q1. Margins improved too.
There are short-term threats as we wait to see whether existing investors bank profits following the first lock-up expiry. Much depends on the war with Iran and interest rates. If energy prices and borrowing costs rise, that will hit risky growth stocks like this one across the board.
Can this S&P 500 share fly over the year?
As for the experts, I’ve never seen such a wide spread of views. The 33 analysts offering one-year share price forecasts produce a high of $800 and a low of $75. The consensus target for August 2027 is $225, which is around the level of June’s short-lived intra-day peak. If correct, that would see the shares climb almost 70% from today.
Of the 40 analysts giving stock ratings in the past three months, most are positive:
- Strong Buy: 27
- Buy: 3
- Hold: 7
- Sell: 1
- Strong Sell: 2
We need to take forecasts with a massive pinch of moon salt, given the huge range of forecasts and the massive uncertainty surrounding everything to do with SpaceX, AI, Elon Musk and the myriad variables affecting the share price.
I think SpaceX is a thrilling stock and well worth considering as revenues soar, but only for strong-nerved investors. I have exposure to its fortunes through the Scottish Mortgage Investment Trust, and I’ll stick with that.
Should you invest £5,000 in SpaceX right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if SpaceX made the list?
Harvey Jones owns shares in Scottish Mortgage.
This story originally appeared on Motley Fool
