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The initial hype pushed Space Exploration Technologies‘ (NASDAQ: SPCX) shares rapidly up to $226, before the firm, best known as SpaceX, swung back the other way to a low of $105. With the share price still deflated, interested investors might be looking at the last chance to buy while the shares are still cheap.
Why? Because later this month, the largest and most powerful rocket that humans have ever built could be launched into an orbital trajectory for the very first time. The SpaceX share price might take off like a rocket too. Here are the details.
Go to plan
Due to weather conditions, we can’t pinpoint an exact date. But expected that no earlier than 15 September, Starship will lift off from Starbase in Texas. If things go to plan, ‘Starship flight test 14’ will deliver 20 of the newest model of Starlink satellites into orbit and send the vehicle itself into an orbital trajectory for the first time.
It’s worth pausing a second to explain why Starship could be a quantum leap in space travel. Starship’s big, really big. It’s about 30 metres taller than the Statue of Liberty. If it were a building, it would be around 40 storeys high. And after being fired into space, it’s then caught on chopsticks on the return leg ready to be reused.
In terms of capacity, it could carry around 100 people for long-distance trips. This is what could pave the way for a human journey to the moon again and, one day perhaps, to Mars.
Hypothetically, Starship’s large enough to carry 1,000 people on shorter journeys if, for example, the technology becomes viable for Earth-to-Earth trips.
The future of the company hinges on Starship being useful and effective, and that’s why this test’s so important. If the SpaceX team can get it into an orbital trajectory successfully, then all those heady long-term goals look that bit more likely.
A buy?
There are no guarantees the share price will rise even if Flight 14 is a major success. ‘Starship flight test 13’, on 24 July, achieved most of its goals and yet the shares fell in value. This kind of volatility seems par for the course here.
Likewise, the company’s valuation needs no lift-off – it’s already in the stratosphere. The company’s loss-making, but even if we take away R&D spending on artificial intelligence from the calculation, the price-to-earnings (P/E) ratio’s in the triple digits. This means lots of room to fall.
Is this one for value investors to avoid then? Maybe. This is a bona fide growth stock. It needs to multiply sales many times to justify the premium in its share price. Interestingly, the growth targets listed in the IPO prospectus have a projected P/E ratio of 15 by 2030. For that figure to be hit, there’s going to have to be many more successful tests like the one later this month.
A high-risk stock then, but one worth considering, I’d say.
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John Fieldsend owns shares in SpaceX.
This story originally appeared on Motley Fool
