There’s a strong case to be made that Space Exploration Technologies (SPCX 2.20%), better known as SpaceX, is the most hyped initial public offering (IPO) of all time. It raised a record $75 billion during its IPO, hitting the market with an initial valuation of $1.77 trillion — making it one of the world’s most valuable companies.
There are tons of people excited about SpaceX as a company, but there are also tons of people who are only excited about the stock and how much money it could potentially make them. They see CEO Elon Musk as a visionary who made plenty of millionaires through Tesla (TSLA +0.39%) and wonder if SpaceX is on that same path.
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Two questions that may guide the answer
Two key factors will heavily influence whether or not a stock can be a millionaire maker: How much someone can initially invest and how much time they have to stay invested in the stock.
If you have $800,000 to invest in a stock, it’s much easier to hit the million-dollar mark, since the investment only needs to grow 25%, compared with having $100,000 to invest and needing it to grow tenfold. The same goes for timing. If you have $100,000 to invest and 20 years on your side, the chances of hitting the million-dollar mark are much higher than if you were trying to accomplish it in five years.
So, which is most important in SpaceX’s case?
Space Exploration Technologies
Today’s Change
(-2.20%) $-3.06
Current Price
$136.08
Key Data Points
Market Cap
$1.8TMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.
Day’s Range
$135.52 – $143.33
52wk Range
$135.52 – $225.64
Volume
311.6K
Avg Vol
144.9M
The numbers don’t currently work in SpaceX’s favor
The average investor is much more likely to have 20 years to invest than to have hundreds of thousands to invest in a lump sum. So, for the sake of this example, we’ll assume someone has $50,000 to invest in SpaceX right now (which is still a lot, to be fair), meaning their investment would need to grow by 20x to reach $1 million.
At the time of this writing, SpaceX is valued at $1.82 trillion, so increasing its value by 20x would put it at $36.4 trillion. Some Wall Street analysts have said they see SpaceX’s valuation reaching the $30 trillion ballpark in the next 15 to 20 years, so it’s not impossible by any means. However, it’s very unlikely, in my opinion.
SpaceX’s initial large valuation works against it. This isn’t a situation like Tesla, whose initial valuation was $1.7 billion when it went public in June 2010. It’s much easier to increase 20x in valuation to reach $34 billion from there than it is when you’re starting from nearly $2 trillion.
A $5,000 investment in Tesla during its IPO would be worth over $1.2 million today — with most gains coming after 2020 — but I don’t see that happening with SpaceX.
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SpaceX needs to deliver on ambitious projects
I do not doubt that SpaceX will eventually make some retail investors millionaires (it has already made plenty of private investors millionaires). Some people have large lump sums to invest, and others realistically have at least 30 years of investing ahead of them to take advantage of compounding growth.
However, I don’t believe it will happen for the average investor anytime in the next decade or so.
SpaceX’s business is solid right now, as the largest space launch company, owner of lucrative AI infrastructure, and with a flourishing Starlink business, but that’s not what will make the average investor a millionaire. It’s going to take delivering on very ambitious projects, such as space data centers, and growing into what SpaceX has predicted is the largest total addressable market in history ($28.5 trillion).
Of course, we can never predict how the stock market will perform, and anything is possible, but realistically, investors are better off looking elsewhere for a millionaire-maker stock. And it’s likely not one that’s currently valued in the trillions.
