WEBULL

SpaceX Stock Drops on Friday. Should Investors Cheer?

The Motley Fool · 1d ago

Key Points

  • SpaceX stock has fallen $10 below its IPO price.

  • Worries over Starship, China, and AI are dogging SpaceX stock.

  • Meanwhile, the valuation picture just keeps getting better.

Space Exploration Technologies (NASDAQ: SPCX) stock briefly fell below $125 a share on Friday, before recovering to about a 4% loss as of 12:55 p.m. ET in the afternoon -- and it doesn't matter.

Whether down 5% or only 4% today, SpaceX stock is officially a broken IPO, returning to just pennies above its IPO price Wednesday, and falling well below it Thursday and Friday. But here's the real question.

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Boy in a lab coat is crying next to a crashed rocket.

Image source: Getty Images.

Is SpaceX's below-IPO share price good or bad news?

That's a tougher question to answer. On the one hand, SpaceX stock has lost the momentum that drove it up 67% from its IPO price in its first three days of trading. The company faces new competition from China, which just completed its first successful water landing of a reusable rocket. It's also been forced to postpone a Starship test flight when multiple engines refused to ignite at launch.

Worst of all, SpaceX's big bet on turning itself from a space stock into an artificial intelligence stock has gone awry, with investors selling off AI stocks in droves the past several days -- "SpaceXAI" among them.

Is SpaceX stock cheap now?

Those are all reasons to avoid SpaceX stock -- but now here's one reason to buy SpaceX instead:

At its new share price of $125, SpaceX stock costs 192 times forecast 2027 earnings, but earnings are expected to grow so fast that by 2028 the P/E ratio drops to 33, and by 2029 -- just 22.5.

Analysts see SpaceX earnings growing on average 152% annually over the next five years, more than doubling every year. While the future's uncertain, and the end may always be near, there's now a reasonable case to be made that SpaceX stock is approaching fair value -- and will soon be cheap enough to buy.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.