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The investment world was all agog to see what the SpaceX (Nasdaq: SPCX) share price would do after its IPO on June 12. Really, we should have guessed. Space Exploration Technologies Corporation makes rockets. They go up, they come down. And that’s exactly what happened to SpaceX stock.
The interesting question is what happens next? And that’s tougher to answer.
Today, SpaceX trades at $154.75. It’s up around 14.6% from its $135 flotation price. As ever when investing, it’s the long term that counts.
Can this Nasdaq stock hit the heights?
The early months were always going to be highly uncertain as SpaceX struggled to establish its market valuation and investors waited to see the impact of expiring lock-ups, which bar existing investors from selling.
It’s also at the mercy of a much broader issue: what on earth is artificial intelligence going to do to us all? One week the world is flapping about an AI bubble and the death of humanity, the next it’s getting excited about the productivity benefits. Everyone from Donald Trump down has a view, but this is uncharted territory. Nobody knows.
SpaceX’s Q2 results told us one thing. It may be throwing money at AI infrastructure, but it’s also generating money too. Revenue jumped 92% to $7.8bn, with growth across all three divisions: Connectivity, Space and AI.
Its Starlink connectivity business is the only segment with an operating profit, up 79% to $1.66bn. Starlink had 12m active subscribers at the end of June, double the number a year earlier. My neighbour is one of them.
Overall, the group is both generating more money than expected and spending more cash. Q2 capital expenditure hit a staggering $18.37bn, more than double quarterly revenue. Of that, $15.83bn, or 86%, went into AI infrastructure.
SpaceX now looks like an AI play, rather than a broadband supplier or launcher of reusable rocket ships. And like I said, everybody has a view on AI.
Broker forecasts are upbeat
Brokers have a view on SpaceX too. Forecasts from 37 analysts produce a median one-year share price target of $222.94. If correct, that would see the shares climb a blistering 44% from today. Could it happen? Hell, yeah. The stock peaked at $225.64 on June 15.
Could the shares plunge to just $75, the lowest forecast? Same answer. Hell, yeah. Inflation could rocket, hitting demand for risky growth stocks across the board. The AI bubble could burst. Elon Musk could say something daft. The group’s AI offering could prove a load of old Grok. Cheap Chinese rivals could sweep the board.
SpaceX remains in its early massive investment phase, building out data centres. This gives it massive scaling potential, but means the shares will remain risky for years, possibly always, frankly.
But it’s also a massive bet on the future and one that I think is worth considering at today’s price, for the right type of investor. I have exposure via the Scottish Mortgage Investment Trust, but am considering buying its shares directly. For those who prefer to keep their feet on the ground, I can see plenty of FTSE 100 growth stocks to consider instead.
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Harvey Jones owns shares in Scottish Mortgage Investment Trust.
This story originally appeared on Motley Fool
