Here is the in-depth analysis of the tech’s next big stock that investors are casting eye over.
- The privately held space exploration company is currently valued at $74 billion.
- The new satellite broadband internet service Starlink being touted as the game-changer for SpaceX.
- Currently, the only source of revenue for Musk’s space venture is its space launch service.
- The last confirmed annual revenues of SpaceX was $2.02 billion in 2018.
- SpaceX has contracts with NASA worth $1.6 billion and worth $6.2 billion each.
Space exploration is the buzzword in the forward-looking world and SpaceX is among the top moguls in this sector.
Elon Musk founded the company with the mission of making space exploration cheaper, therefore, to make Mars colonization a reality. In recent years, the market valuation of the privately held company was reported to be at $74 billion after it raised about $1.16 billion via equity funding during the early part of this year. In comparison, it was valued at $46 billion after a $2 billion fundraising round by the company in August 2020.
The primary business focus of SpaceX is manufacturing and launching rockets and spaceships at affordable prices so as to make space exploration cheaper. Founded in 2002, by billionaire Elon Musk, it was the first private company to launch astronauts into space in May 2020. In recent years the company has upscaled its venture into satellites namely Starlink, to provide high-speed internet on Earth through a set of interconnected satellites in low Earth orbit.
Currently, the only source of revenue for SpaceX is its space launch service which transports cargo to and from the International Space Station and launches satellites primarily into low earth orbit. The company also uses reusable rockets that can fly back to Earth and has developed the rocket with the highest payload capacity ever, Falcon.
While anything that is related to Musk is news, especially for investors and the wider market, his indication of taking SpaceX’s Starlink public has caused a stir in the markets. Earlier this year Musk tweeted that he could spinoff Starlink and get it publicly listed “once its cash flow is predictable”. He, however, has also tweeted: “SpaceX must endure a deep chasm of negative cash flow over the next year to make Starlink financially viable.”
Currently, it is not possible for retail investors to directly invest in SpaceX stocks- until the company is listed. There is, however, a roundabout way to invest in the company. But prior to that, it is important to note whether one should choose to invest in the company under the current situation.
Space Exploration Technologies or SpaceX essentially designs, manufactures, and launches reusable rockets and spacecraft with the aim of reducing space transportation costs. Musk has also touted his long-term aim to colonize Mars through the medium of his space venture. The rockets and space crafts developed for this purpose by SpaceX are the Falcon launch vehicle and the Dragon space crafts which it uses for delivering payloads into Earth orbit.
The last confirmed annual revenue of the company was $2.02 billion in 2018 and has raised a total of about $6.6 billion in funding over 50 rounds with the latest funding round being held on Aug 25, 2021, from a Secondary Market round.
It is estimated that there are 52 investors in the company and K3 Diversity Fund and Spectre are the most recent investors. SpaceX has acquired Swarm Technologies on Aug 6, 2021.
SpaceX and NASA
SpaceX struck a contract with NASA worth $1.6 billion to deliver cargo to the International Space Station (ISS). The company’s Dragon spacecraft made a visit to the ISS in May 2012, marking the first-ever privately developed spacecraft to do so in history. Further, another contract worth $6.2 billion was awarded to SpaceX by NASA in Sept 2014 for taking NASA astronauts into space.
This is part of NASA’s policy of increased dependence on private companies for services which has increased business opportunities for SpaceX, Lockheed Martin, Boeing, and Blue Origin, among others. SpaceX also launched its first-ever crewed mission on May 30, 2020, that sent NASA astronauts to the International Space Station.
SpaceX’s Starlink Project
There is a hype about SpaceX’s Starlink, the satellite-based Internet service, which is being viewed to be one of the major drivers of SpaceX’s long-term revenue and growth potential.
A few months ago the service went into beta testing and it is touted that it would start generating revenues this year. For this project, SpaceX has launched more than 1,000 working satellites so far using its reusable Falcon 9 rocket. The ultimate goal of the company is to place 42,000 satellites in low Earth orbit for its Starlink project by mid-2027 which will beam down high-speed internet service globally. The service currently is able to provide internet to customers in the northern United States, Canada, and some parts of Europe. The company claimed it already has more than 10,000 users globally.
Currently, the monthly rental for availing of the service is $99 along with an upfront charge of about $500 which is for a satellite dish and related equipment. It has been reported that the current speed of the internet service provided by Starlink is between 50 to 150 Megabits per second. Even though the current prices of Starlink’s service are higher and its internet speed slower than some of the mainstream broadband services, it is anticipated that both price and speed would improve over time with scale and user number of Starlink increases.
At the same time, however, the rollout of 5G services promises to offer gigabit-speed internet over wide areas which will directly rival the fixed-line internet services including that from SpaceX.
Ways for Investing in SpaceX Stocks
While it is currently not possible to invest directly in SpaceX stocks as retail investors, there are indirect ways of betting on the future prospect of the company.
One of the ways is to invest in one of the two Baille Gifford trusts to indirectly invest in SpaceX stocks. The shares of this company trade on the London Stock Exchange.
It is also possible to indirectly hold SpaceX stocks by purchasing Google stocks which had invested $900 million in the company in 2015 through a joint venture with Boston-based financial services provider and fund company Fidelity. So far there are no reports of either Fidelity or Google selling their SpaceX stocks.
There are also a number of venture capital funds that own SpaceX stocks and include names like Founders Fund, Gigafund, and Valor Equity Partners.
Retail investors interested in getting an indirect stake in SpaceX can also watch funds that invest in space exploration, aerospace, and the military which could also be owners of Elon Musk’s company.
Even though SpaceX is new to the market, it apparently can outpace its rivals because of its lower price point estimated annual launch revenues, according to Jefferies analyst Sheila Kahyaoglu. According to estimates, SpaceX logged $2 billion in launch revenue in 2018, the last comprehensive data available from the company, while the total estimated rockets launch revenues of the sector totaled $8 billion, according to estimates of Jefferies.
It is also estimated that the Starlink project of SpaceX could also provide additional revenues for the company unlike most of the rivals which are only focused on revenue sources such as rocket launches and space tourism. This potentially pits SpaceX stocks to be more attractive than those of rivals. And even though a retail investor cannot currently purchase SpaceX stocks, it is possible to make an investment for the future potential of the company through indirect means – till such time that the company does not publicly list itself.