Key Points

SpaceX now trades well below its IPO price, but the business is growing quickly.
There are many technical challenges the company needs to overcome to be successful.
Shares of the stock trade at extreme multiples, even if you think its most optimistic growth assumptions come true.
10 stocks we like better than Space Exploration Technologies ›

That occurred rapidly. Space Exploration Technologies (NASDAQ: SPCX) has declined nearly 45% from peaks reached shortly after its large initial public offering earlier this year. The space industry leader led by Elon Musk has encountered ongoing selling pressure lately, and has now returned to its IPO price of $135.

As of midday July 17, SpaceX trades at $124.35, so investors who purchased at the IPO or later have incurred losses. Nevertheless, from a fundamental standpoint, the shares appear overpriced. This is why I continue to avoid purchasing SpaceX stock, even at near lows.

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Image source: Getty Images.

Fast growth, but uncertain profitability

SpaceX possesses clear expansion prospects, particularly via its AI segment and Starlink satellite service. Starlink produced $11.4 billion in sales for 2025, a 50% increase from the prior year. It also boasts excellent profit margins. With 10 million users and worldwide market potential, Starlink has significant upside ahead.

The AI infrastructure area is nascent but poised for strong gains versus last year's $3.2 billion. The firm has poured billions into AI-focused data centers and secured deals with both Alphabet and Anthropic potentially worth $26 billion per year.

Risk exists that clients withdraw from these arrangements, but 2025 revenue of $18.7 billion should surge higher.

Unproven technologies need to be engineered

Challenges lie beyond near-term sales, throughout the rest of the decade. Ambitious projects demand heavy investment with uncertain outcomes.

Consider Starship. This rocket aims to boost payload capacity over Falcon 9. It is the largest ever, with 100-150 tons to low Earth orbit. It could help deploy more Starlink satellites in coming years to maintain leadership.

However, it lacks proven reliability for commercial use, given past misfires and explosions. This affects orbital data center plans too. Even if technical issues are resolved, launch constraints could limit progress.

Data by YCharts.

Why SpaceX stock is still overvalued

Even assuming success in data centers and Starlink, valuation is high.

In 2025, SpaceX generated $18.7 billion in revenue. In an optimistic case, sales could reach $100 billion by 2030, though launch limits cap further upside. Outside Starlink subscriber margins, profit margins are unlikely to be exceptionally high.

Assume revenue hits $100 billion in 2030, yielding $20 billion in earnings. At today's $1.64 trillion market cap, that implies a forward P/E of 82 - a steep premium for a five-year projection.

This should keep investors away from SpaceX stock for now.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.