Image source: Getty Images
The Tesla (NASDAQ:TSLA) share price hasn’t exactly been powering on all its batteries this year. In fact, the stock’s down around 12% since January, despite a recent 9% bounce leading up to its results. And Elon Musk’s other public company isn’t doing much better.
Space Exploration Technologies (NASDAQ:SPCX), or SpaceX, has also slipped by around 15% since going public in June. However, Musk’s shareholders are no strangers to volatility, and many have learned to treat dips as buying opportunities.
So looking at both of these businesses today, which one might offer me the better value? Let’s take a look.
A tale of two growth stories
On the surface, Tesla looks like the steadier business. Third-quarter revenue was flat at $28bn, but it still generated $1.5bn of free cash flow with $45.4bn of cash & equivalents sitting on its balance sheet.
SpaceX is a completely different beast. Revenue rocketed 161% to $14.6bn, although not because of more spaceflights but rather a massive surge in revenue from its AI computing division, which grew by a jaw-dropping 830% year on year to $7.6bn. And in a surprise twist, the AI segment actually turned a $431m profit during the quarter.
Pair that with management’s revenue guidance of $33bn-$37bn for the first quarter of 2027, and it’s no wonder institutional analysts are getting excited with a $245 consensus share price target – 80% higher than current levels.
By comparison, the same group of experts only see $415 as a realistic 12-month target for Tesla shares, signalling only an 8% gain from current levels.
On the surface, then, it seems that SpaceX looks like the better deal today. However, that might not actually be the case…
What could go wrong?
SpaceX’s problem is cash. It spent $19.6bn on investment in this latest quarter. However, management’s actually planning to spend another $35bn-$40bn in the next quarter alone!
Almost all of this money’s being funnelled into its AI segment to build out new compute capacity, which the group’s finance chief says will begin paying for itself in under a year. That might be true, but with fears of a looming slowdown in AI driven by rising token costs, this outlook might prove overly optimistic.
Having said that, Tesla isn’t immune to potential disappointments either. The biggest concern right now is profit margins.
With competition from Chinese electric vehicles eating away at its market share and its own set of capital-intensive robotics projects, operating margins have collapsed and now stand at just 2.6%. And subsequently management’s warned that margin pressure will continue until its Optimus and Robotaxi projects begin to deliver meaningful results.
Which offers better value?
When looking at the SpaceX and Tesla share price today, neither’s trading in value stock territory. But out of the two extremely rich valuations, SpaceX does seemingly have the growth to potentially support its premium.
I’m still quite concerned about the rate of cash burn for the space & AI enterprise, which is why I’m not rushing to buy shares anytime soon. But for investors who want to own a piece of a Musk company, it could be worth investigating a little further.
Should you invest £5,000 in SpaceX right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if SpaceX made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
