There is a certain allure to getting in early on a company that feels like the future, and few companies radiate that energy quite like SpaceX. With its second-quarter earnings report set for August 4, some investors are undoubtedly wondering whether now is the time to put real money behind Elon Musk’s space venture. The bull case is not hard to see. Analysts are only expecting a loss of 28 cents per share on revenue of around $6.87 billion, meaning anything even slightly better than those modest expectations could spark a rally and reverse the 33% slide the stock has suffered since its post-IPO peak.
But the odds of a clean breakout are working against investors for several reasons, starting with the reality check still settling over a company that went public amid extraordinary hype. SpaceX carries a valuation of roughly $1.5 trillion despite being unprofitable, with projected revenue somewhere near $40 billion this year. Next year could bring that figure up to $73 billion and finally nudge the company into the black, but only barely. For a stock priced for perfection, barely profitable may not be enough to satisfy a crowd still coming down from pre-IPO euphoria.
Then there is the matter of share lockups expiring. Roughly 911 million shares are currently locked up compared with about 7.6 billion outstanding, and beginning on August 6 many of those shares will be freed up for sale. More will follow over the coming year. It works like a pressure valve: the better the stock performs, the more shares qualify for unlocking and the greater the selling pressure becomes.
History offers another reason for caution. Research from Edward Jones found that during the long bull market from 2011 through 2020, newly public technology stocks were down an average of 14% from their IPO price just six months after debuting. Data from Nasdaq Economic Research shows things do not necessarily improve with time either, as roughly two-thirds of those tickers were still trading below their offering price three years later. The message is straightforward enough even if it lacks excitement. Counting on exceptions to well-established trends rarely pays off, no matter how compelling the story behind the stock might be.
