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All my SpaceX shares

Last week, SpaceX launched its significantly oversubscribed IPO.

At launch, the stock price was US$135 but it has since climbed to (as I type this) around US$185. That's a 37 percent gain in just a few short days.

This is not unexpected as we're still in the honeymoon period and we're seeing the simple effects of supply and demand kicking in.

The real question is: where to from here for SpaceX stock?

This is where opinions vary quite wildly.

There are a lot of people who believe that SpaceX is destined for bigger and brighter things. This, they claim, will see the stock price continue to rise, perhaps by multiples in coming years.

Others however, and I put myself in this category, are not so confident.

I've published a previous column where I examined SpaceX's revenues and profits. In that column I pointed out that only its StarLink service is actually producing a profit -- while its rocket-launch service continues to run at a tragic loss, consuming billions of dollars year after year.

Much of what you think SpaceX will do is probably linked to the success (or otherwise) of the long-awaited StarShip craft that was supposed to have already delivered a significant amount of payload and humans to Mars, years ago.

Suffice to say that the best it has done are a few suborbital hops to the Indian Ocean with a firey landing on those waters.

The fanboys have pointed out that this situation is just fine and it won't be long at all until we have a regular cadence of StarShip launches with those craft and their boosters being reused many times.

Errr... I'm not so sure. Yes, the last StarShip mission did make it to the Indian Ocean but it wasn't in fantastic shape as it descended to splashdown. There's no way you could re-used that craft without a snotload of inspection and repair. Knowing what I do about this sort of thing, I'd actually say that at this stage, it would be cheaper just to make a new one rather than re-use the old one.

Stainless steel is notoriously subject to work-hardening and fatigue so the task of inspecting the whole damned thing for microscopic cracks and flaws is an enormous one. Let's also not forget that an engine or two failed on that flight, causing collateral damage and thus requiring some significant repair. When you also factor in the need to repair and revalidate the thousands of heat-shield tiles and you're not going to have a cadence of anything like that which has been suggested as possible by the company.

Then there is the issue of capacity.

Starship's big claim to fame is that it will have such a massive capacity that it will lower the cost of hoisting stuff in to orbit. The real challenge, IMHO, will be finding enough stuff to hoist.

There is only a finite demand for orbital delivery services and if SpaceX was to perform as it claims it will, with an almost hourly cadence of launches, who's going to be paying to fill it with their payload each time? Where are the customers?

None of this would matter if SpaceX stock was appropriately priced -- but it's not. SpaceX doesn't yet have an audited PE ratio (price to earnings) but its PS (price to sales) is a woeful 92. Remember that "sales" is always a much bigger number than "earnings" (or net profit) so the PE is likely to be hundreds to one.

This means that, by any metric, SpaceX stock is massively overpriced and is more like a lottery ticket than an investment at this stage. It becomes incredibly difficult to imagine any scenario where SpaceX can boost its profits (from the current loss) to a figure that makes it a sensible investment. There just isn't enough demand for the services it offers to deliver the revenues necessary for this -- regardless how efficient it might be.

Of course they've also got a finger in the AI pie with their xAI division -- but I think most people appreciate that there is a very real bubble involved here so if/when that pops it will become even harder for SpaceX to make a profit and much of its current investment in AI will likely need to be written off.

Perhaps this should be the warning: "It's a big sky, but only *so* big".

Carpe Diem folks!

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