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The S&P 500 has been volatile over the past few weeks, and it hasn't notched a new high in over a month. It's down 4% over the past month and up 9% year-to-date, ending its streak of annual double-digit gains for now.
The tech sector has been hit harder than others, and Space Exploration Technologies (NASDAQ: SPCX), or SpaceX, stock is down 11% from its first-day closing price. Let's check out where it could be in five years.
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Despite its extraterrestrial name, SpaceX sees itself as more of an artificial intelligence (AI) company than anything else. Since Elon Musk merged SpaceX with xAI, the AI business is now part of the company, and the company's vast market opportunity belongs to this segment, which it has renamed Super Intelligence (SI).
The space business, though, is very exciting and is making rapid progress. The company is highly focused on perfecting fully reusable rockets, which would be a game changer for the space economy. Musk envisions sending the new Starship rocket into space weekly starting in 2027, and then twice weekly or more in the back half of the year. This is the only SpaceX segment that reported an operating loss in the third quarter, but reusable rockets will go a long way toward profitability.
It's also opening a new base in Louisiana with 20 launch towers and the ability to send millions of tons into space annually.
Looking five years out, SpaceX could be making several flights weekly using reusable technology and be fully profitable.
The Starlink satellite broadband business is the partner to the rocket business. It's the largest business of its kind, with 11,000 satellites in orbit, launched by SpaceX rockets and covering 190 countries. Musk believes that over the next three to five years, it will have 100 times the bandwidth it currently has. That equates to 100,000 satellites, or almost 10 times today's figure, each with 10 times more bandwidth.
It also plans to have a million Starlink mini data center satellites in the future.
The Starlink business is growing fast and highly profitable, with 13.6 million subscribers as of the third quarter, up from 7.2 million last year.
Amazon is building a business to compete with Starlink, but it's much smaller. However, this is something to keep an eye on.
SI is the company's fastest-growing segment and where it sees its biggest opportunities. SI revenue increased 830% year over year in the third quarter, and it posted its first quarterly profit of $431 million.
SI includes the Grok AI model, the Cursor coding platform, and the Colossus data centers that drive AI development and generate rental revenue from clients like Anthropic and Alphabet.
SI has 1.7 GW (gigawatts) as of the third quarter, and Musk thinks it can reach 20 by the end of next year. In five years, it should be well beyond that. However, data center development might face some challenges as new lawmakers enter Congress and become governors in 2027. How regulations develop is unclear right now, and they might force an industry slowdown. SpaceX stock wasn't negatively affected by the news, since it already has a top position and plenty of power for the time being.
If SpaceX continues to grow fast and SI takes off, the company should be a lot bigger in five years. There are two reasons I'm hesitant to recommend it as an investment.
The first is the unknown. It sure looks as if AI is going to keep growing fast, but there could be many new developments that hinder SpaceX's expected growth, such as new technology and cheaper competition.
It's also extremely expensive, trading at a price-to-sales ratio of 58, and that ratio keeps falling as revenue rises and the stock price goes down. It will likely continue to decline, which limits how high the price can go.
However, the stock's value could still be much higher in five years. SpaceX revenue increased 161% year over year in the third quarter, and Wall Street is looking for 270% next year. If the company can grow at a compound annual growth rate of much less than that, say 50%, over the next five years, it would have $247 billion in trailing 12-month sales. At a price-to-sales ratio of 20, it would have a $4.9 trillion market cap, or 150% more than today's figure, and the stock would be worth $357.
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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Space Exploration Technologies. The Motley Fool has a disclosure policy.
Prediction: This Will Be SpaceX's Stock Price in 5 Years was originally published by The Motley Fool
