SpaceX (SPCX) is doing more than launching rockets. It is building a satellite internet empire, expanding into wireless communications, and investing heavily in artificial intelligence (AI). But even with those ambitions, profitability remains a concern. SPCX stock has erased its IPO gains, down 6% since it started trading in June. Cathie Wood’s latest $9.4 million sale of SpaceX stock adds another reason for investors to pause before rushing in.
www.barchart.com Why Cathie Wood’s SpaceX Sale Deserves a Second Look
On Oct. 6, ARK Invest sold 54,873 shares of SpaceX worth approximately $9.43 million through its ARK Next Generation Internet ETF (ARKW). The move attracted attention, particularly as the firm also poured money in other technology and aerospace businesses, such as Coreweave (CRWV) and Archer Aviation (ACHR).
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This doesn't mean Wood has lost confidence in SPCX stock or that SpaceX is struggling. SPCX is still the second-largest holding of ARK's combined ETFs. In fact, this move looks like a typical portfolio rebalancing. Fund managers often adjust holdings to pursue other opportunities or avoid putting too much money into one company.
The key question for investors now is whether SpaceX’s growth prospects are strong enough to justify its current risks and valuation.
SpaceX Is Growing Fast, but It Is Still Losing Money
In the second quarter, SpaceX’s revenue climbed 92% year-over-year (YoY) to $7.8 billion. Connectivity revenue, led by Starlink, rose 66% YoY to $4.3 billion. Subscribers doubled to 12 million, with over 1.7 million new users joining during the quarter. The Space segment brought in $962 million, a 29% increase from last year. AI revenue jumped 247% to $2.6 billion, helped by new cloud-computing deals. Management also noted progress on Starship V3 and new Starlink satellites that will boost network capacity.
The company is funding several ambitious projects at once, including Starship, next-generation Starlink satellites, mobile connectivity, and AI computing infrastructure. In the second quarter alone, it spent $18.4 billion on capital expenditures, about $15.8 billion of which went toward AI computing infrastructure. SpaceX is bringing in a lot of revenue and growing fast, but heavy spending is weighing on the bottom line. Its adjusted EBITDA climbed to $3.6 billion from $1.2 billion a year earlier. However, it is not a true measure of profitability but a measure of operating performance. The company still recorded a net loss of $541 million, although that was an improvement on the $1.0 billion loss a year earlier.
Last week, Tesla (TSLA) revealed its new Roadster, showing how far SpaceX's engineering has come. The redesigned electric sports car uses SpaceX-developed rocket-style thrusters to perform mid-air maneuvers, alongside a suction system that enabled the vehicle to travel upside down on a ramp. However, this does not mean the car will become a major source of revenue for SpaceX. The niche supercar is a Tesla product developed in collaboration with SpaceX, but it is still unclear how much commercial impact it will have.
The company’s massive investments could create valuable recurring revenue streams. However, if projects take longer than expected to scale, or if demand and pricing disappoint, it could delay the path to profitability.
Moving Into Wireless, but Competition Will Be Tough
SpaceX is moving beyond satellite broadband. It recently announced its decision to acquire wireless spectrum, suggesting that it wants to compete more directly in mobile communications. This move will let SpaceX link its satellite network with ground-based wireless systems, creating another potential revenue stream. However, entering the wireless market doesn’t mean it can dominate it immediately. Established carriers like AT&T (T), Verizon (VZ), and T-Mobile (TMUS) already have extensive networks, customer relationships, and infrastructure. In fact, this has become another capital-intensive project that investors must factor into their decision before considering SpaceX stock.
The Biggest Reason to Wait on SPCX Stock
Probably, SpaceX’s high valuation may be the biggest reason for investors to hold off pouring money into the stock now. Since SpaceX is not yet profitable, we look at its price-to-sales (P/S) ratio to assess its value. SPCX stock currently trades at 16 times its projected 2027 sales, which are expected to grow 158%.
SpaceX has long-term potential in areas like rocket launches, satellite connectivity, mobile services, and AI infrastructure. This makes the company appealing, but it also raises questions about how much investors should pay now for profits that might not show up for years. Wood’s $9.4 million sale doesn’t necessarily imply it is time to dump the stock. But it is a reminder that even exciting companies need careful review before investors commit their money.
On Wall Street, SPCX stock holds a consensus “Moderate Buy” rating. Of the 40 analysts that cover the stock, 26 rate it a “Strong Buy,” three say it is a “Moderate Buy,” eight rate it a “Hold,” and one recommends a “Moderate Sell,” with two analysts recommending a “Strong Sell.” The average target price of $225.13 implies SPCX can climb by 50% from current levels. However, the stock has a high price estimate of $800, which suggests a potential upside of 433% over the next 12 months.
www.barchart.com On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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