SpaceX shares have been trading above $160 all week, the level they closed at on July 6 but have not returned to since. The stock has risen 48% since its low on Aug. 5 and continued to rise following news of SpaceX’s acquisition of a critical spectrum package that will allow the company to provide full mobile coverage throughout America.
Image source: SpaceX
In June, immediately after its IPO, SpaceX shares rose from a starting price of $135 to more than $200, providing a capitalization of $2.44 trillion. But by the end of July, the stock price had collapsed to $108, reducing the company’s market value by $1.2 trillion. Restrictions preventing early investors from selling their stakes expired in August, raising the free float to about 33% of the total outstanding shares, up from 7.5% at the time of the IPO. The current recovery has returned more than $750 billion in market value, giving SpaceX a market capitalization of $2.13 trillion.
Wall Street feared that the end of the restrictions would trigger a wave of sales, but the stability of the share price suggests that insiders are in no hurry to get rid of their stakes. According to analysts, many SpaceX insiders prefer to maintain their positions because they are confident in the company’s enormous potential.
According to experts, going public has made SpaceX one of the most profitable options for investment in the space technology and intelligence sector. The stock is now trading at a P/E ratio of 111, down from more than 540 in July. Given its year-over-year growth rate, the stock looks even more attractive.
In addition, the stock likely received support from buyers during the September rebalancing of the Nasdaq 100 Index. SpaceX’s share of the index increased due to an increase in the volume of free float, which forced funds that track the index to buy more shares. The supply of shares is growing, but at the same time their weight in the index is increasing.
Image source: Bloomberg
“It’s a long game; there is a certain aura of mystery about it – what can be called the “Elon Musk effect” – and I believe this is what drives the quotes,” said Bloomberg Intelligence analyst George Ferguson. — The company has many sincere supporters.”
Of course, investing in a company like SpaceX comes with risks. For example, the company plans to raise borrowed funds in the amount of $40 billion to purchase chips from Nvidia. The deal could be one of the largest in AI infrastructure financing, and comes as long-term U.S. Treasury yields are at their highest in decades. This news caused the share price to decline by 6.6%.
SpaceX shares may face additional pressure going forward. This week, restrictions on the sale of shares expire, as a result of which another stake will become available for trading – 7% of the company’s shares. Additionally, SpaceX is scheduled to release its second quarterly earnings report as a public company in November. The end of another major period of sales restrictions is scheduled for the same month.
“Investing in SpaceX is a leap of faith. – says analyst Larry Tentarelli. — You need to buy a stock and hold it for two, three or four years, regardless of volatility. After all, from a fundamental point of view, there is no reason to buy SpaceX right now.”
If you notice an error, select it with the mouse and press CTRL+ENTER.
