SpaceX Stock: Why I'm Not Buying the Dip

SpaceX (SPCX) reported its first quarterly earnings as a public company on August 4, and the results were a mixed bag. Revenue soared 92% year over year to $7.8 billion, and the net loss narrowed to $541 million from $1 billion a year ago. However, the market focused on the negatives, sending the stock down sharply. Shares are now 20% below the IPO price and 52% off their all-time high.

The biggest red flag is SpaceX's aggressive spending on artificial intelligence. In Q2, the company poured $15.8 billion into AI-related capital expenditures, more than doubling from the prior quarter and over six times the combined capex of its other segments. Management plans to keep spending heavily, which could pressure near-term profits.

Adding to the concerns, SpaceX announced a $60 billion all-stock acquisition of AI startup Cursor. This will dilute existing shareholders, and the first lockup period expired on August 6, allowing insiders to sell shares. The combination of dilution and potential insider selling could weigh on the stock in the coming months.

Finally, the valuation is hard to justify. With a market cap of $1.5 trillion and quarterly revenue of $7.8 billion, the price-to-sales ratio sits at an eye-watering 73.4. Even for a dominant player in space and satellite connectivity, that's a steep premium.

In short, the earnings report highlighted strong growth but also revealed significant near-term headwinds that have investors worried.

For investors, the key takeaway is that SpaceX's growth story is intact, but the path to profitability is clouded by massive AI investments. The company is betting big on AI, but returns are unlikely to materialize within the next year. This means the stock could face continued volatility and potential downside.

The Cursor acquisition, while strategically sensible, adds dilution risk. If many new shareholders sell their shares, it could create a supply overhang. The lockup expiration adds another layer of uncertainty, as insiders may choose to cash out.

Valuation is a major concern. At a P/S ratio of 73.4, the stock is priced for perfection. Any stumble in execution or market sentiment could trigger a sharp correction. Historically, even high-growth companies with strong fundamentals trade at much lower multiples.

On the positive side, SpaceX's long-term prospects are compelling. Starship could revolutionize space travel, and its satellite internet business is growing. But these opportunities are already reflected in the current price, leaving little room for error.

For now, the risk-reward balance is unfavorable. Waiting for a better entry point could be a prudent strategy, even if it means missing out on some upside.