SpaceX Has Fallen 45% Since Its Peak: Gary Black Says Investors Are Breaking the 'Number One Rule in Inve
The article discusses commentary from Gary Black, Managing Partner of The Future Fund LLC, regarding SpaceX's recent stock performance and its valuation. Black emphasizes the key investment principle of distinguishing between a great business and a great stock, criticizing the notion that SpaceX's strong business model justifies its high valuation of $1.7 trillion and a forward enterprise value-to-revenue multiple of about 40 times, which he states has no historical precedent among major companies. He compares SpaceX's valuation trajectory with that of other tech giants like Nvidia, Tesla, and Google, highlighting a divide between bullish and bearish analysts. Despite SpaceX's stock declining about 45% from its peak, some analysts maintain strong buy ratings. The article also references upcoming events that may impact the stock, including an earnings report and IPO lockup expiration.
The Future Fund LLC Managing Partner Gary Black on Sunday said investors are breaking the “number one rule in investing” by treating Space Exploration Technologies Corp.(NASDAQ:SPCX) as a great stock simply because it is a great business.
‘Don’t Conflate A Great Business With A Great Stock’
Black, in a post on X, said his criticism was not directed at SpaceX CEO Elon Musk or its long-term prospects, adding that the company may be a “great, uniquely positioned business” but that investors should distinguish between the quality of a business and the price they pay for its shares.
He said SpaceX’s roughly $1.7 trillion market capitalization “shouldn’t mathematically” command a forward enterprise value-to-revenue multiple of about 40 times, calling it a valuation with no historical precedent among trillion-dollar companies.
Black Compares SpaceX With Nvidia, Tesla And Other Mega-Caps
After asking Grok whether any company with a market capitalization above $1 trillion had ever sustained a forward EV-to-revenue multiple above 40 times, Black shared the chatbot’s response that none had, including the world’s second most valuable company, Nvidia Corp.(NASDAQ:NVDA).
According to the response, NVIDIA’s trailing EV-to-revenue multiple briefly approached 45 times.
Still, its forward multiple generally remained between 10 and 25 times as revenue growth accelerated.
Black has consistently maintained that SpaceX’s valuation leaves little room for upside, saying last week that the IPO should not have been priced at $135 and that he would not get excited about the stock until it trades below $100.
The bearish view contrasts sharply with Wall Street, where Raymond James Financial Inc.(NYSE:RJF)recently set an $800 price target and other major brokerages continue to rate the stock a buy despite its roughly 45% decline from its peak.
Investors are now looking ahead to SpaceX’s first earnings report as a public company, expected around August 17 or earlier, followed by the expiration of the IPO lockup period, both of which are expected to be the next major catalysts for the stock.
