The company Space Exploration Technologies, founded by Elon Musk in 2002, only became a “unicorn share” in 2012. It took nearly a decade to reach a private market valuation of $ 1 billion. But once SpaceX got going, it went off like a rocket.
It took SpaceX just four more years to increase its value tenfold, reaching $ 10 billion in 2016. SpaceX reached another milestone earlier this month, growing 10x to a market cap of $ 100 billion. If SpaceX continues to grow at this rate, the company could reach a valuation of $ 1 trillion by the end of the decade. There is only one way to invest in the company at this time.
The valuation of $ 100 billion
As reported by CNBC, SpaceX insiders have agreed to sell their shares worth up to $ 755 million to outside investors at a price of $ 560 per share. At that price, all of the company’s current (privately) outstanding shares would have a total value of $ 100.3 billion.
That’s 33.3% more than SpaceX shares were worth back in February, the company’s last reported stock sale. (Oddly enough, on its February stock sales, SpaceX raised $ 1.2 billion for itself by selling new shares, while insiders moved $ 750 million in shares through a secondary sale of shares. Shares got higher this month valued even though no new capital was raised.)
Nevertheless, SpaceX has catapulted itself to the status of a “Centicorn” with this latest share transaction. It is one of only two privately held companies worth over $ 100 billion. The only other centicorn in the world is the Chinese company Bytedance – the parent company behind TikTok.
How SpaceX Reached the $ 100 Billion Valuation
SpaceX achieved this incredible rating primarily because of two developments: Starlink, a system for providing broadband internet to Earth via a constellation of approximately 1,700 satellites (and growing). Plus Starship, an experimental, reusable spacecraft and launch booster system designed to put payloads of 100 tons or more into orbit once it is operational.
SpaceX expects these two systems to generate sales of up to $ 36 billion by 2025. Personally, I have my doubts about this number. But honestly, as long as SpaceX doesn’t bow to investor demand and go public, SpaceX’s sales and even earnings numbers will be of little interest to investors. More importantly, the impact of SpaceX’s business success on the stock prices of its competitors: space companies like Lockheed Martin and Boeing.
What SpaceX’s valuation means for Lockheed Martin and Boeing investors
Lockheed Martin’s aerospace business, which is largely part of the United Launch Alliance (ULA) joint venture with Boeing, contributed $ 12.25 billion to the arms giant’s sales, according to S&P Global Market Intelligence. Boeing, on the other hand, does not report the figures for its space business individually, but rather aggregates them together with income from the defense and security sector in its Boeing Defense, Space & Security (BDS) department. However, if we assume that Boeing’s space business, as a 50:50 partner of ULA, is on par with Lockheed’s, we can estimate the total value of the space revenues of the two companies to be approximately $ 24.5 billion.
Granted, that’s more than NASA’s entire 2021 budget of $ 23.3 billion. But Boeing, Lockheed, and Boeing-and-Lockheed-as-ULA are also getting a ton of money from Pentagon defense contracts for space work that isn’t on NASA’s budget.
Boeing and Lockheed’s space businesses are also growing. For example, Lockheed’s aerospace sales grew 26% from 2016 to 2020, and Boeing’s combined BDS business grew 30%. In contrast, it’s hard to tell how much SpaceX has grown over the same period – as a private company, it’s not required to disclose its calculations. However, based on internal SpaceX projections made to the Wall Street Journal a few years ago, SpaceX expected its own revenue to grow more than 200% in the period from 2016 to 2020. And if the company continues to grow according to those projections, it could revenues will more than quintuple over the next five years.
If things continue as they are, SpaceX’s expected $ 36 billion in 2025 sales will likely dwarf Boeing and Lockheed’s combined $ 32 billion (even given the latter’s generous growth rate of 30% assumes). Additionally, investors shouldn’t rule out that SpaceX’s tremendous growth will come at the expense of Boeing and Lockheed – that is, the faster SpaceX grows, the slower its competitors will grow.
In short, the future of SpaceX looks very bright indeed. The future of Boeing and Lockheed Martin in space travel, however, is not so much.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. This article appeared on 10/24/2021 on Fool.com and has been translated for our German readers.
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The 100-fold unicorn: SpaceX by Elon Musk