Cathie Wood Considers SpaceX a Strong Investment Opportunity Despite Valuation Concerns

Cathie Wood, CEO of Ark Invest, has a differing perspective. On September 16, she shared her views on X, suggesting that SpaceX might be a "deep-value opportunity" at its IPO price, given her significant investments in the company.

In her analysis, Wood, alongside Ark analyst Sam Korus, points to the revenue potential from Starlink, SpaceX's satellite internet service. They noted that by 2025, Starlink was projected to generate approximately $19 million in annual revenue per terabit per second (Tbps) of network capacity. With each Starship capable of carrying about 60 Starlink V3 satellites, the potential capacity added per launch is roughly 61 Tbps, equating to about $1 billion in recurring annual revenue per launch.

SpaceX CEO Elon Musk has ambitious plans, targeting 10,000 Starship launches annually by 2030. Wood claimed that if each launch achieves $1 billion in revenue, this could lead to an astonishing $10 trillion in annual earnings. Musk’s response to her projection was simply, "It's not impossible." However, achieving such a figure raises doubts, considering that SpaceX is currently far from the target of 10,000 launches per year. The company conducted its first Starship launch in 2023 and has completed 14 total flights thus far, with only nine successful missions.

SpaceX's overall launch activity has been substantial, representing about 80% of all U.S. orbital launches recently. However, increasing from fewer than 10 Starship launches annually to 10,000 by 2030 appears unrealistic. Furthermore, Wood's estimates assume that each flight will exclusively deliver Starlink satellites, which may not be the case. The multitude of different missions could dilute revenue from Starlink, especially since the revenue per terabit is forecasted to decline from $23 million in 2024 to $19 million in 2025.

Currently, SpaceX's valuation remains high, with a market cap of $2.2 trillion and trading at around 102 times its trailing sales. In comparison, Nvidia has a trailing price-to-sales ratio of 19, while Palantir Technologies stands at 83 times sales. Wood’s evaluation of SpaceX relies on highly optimistic projections far into the future. At present, SpaceX's stock shows considerable volatility and trades at multiples much higher than many tech companies. As investors consider entering this space, they should weigh both the optimistic projections and potential risks, including possible declines during market downturns.