The stock price of Space Exploration Technologies has nearly halved in just over a month, catching the attention of investors. When the company made its initial public offering, it raised a remarkable $86 billion. This amount is more than double the previous record set by Saudi Aramco, which collected $25.6 billion during its IPO in 2019.
Despite the impressive debut, the share price has since experienced a significant drop, leading to speculation about the company's future performance. The stock hit a high of $225 just a week after the IPO in June but has since fallen by 50% from that peak. It ended the month at a share price of about $108, well below the $135 IPO price.
Cathie Wood's Support for SpaceX
Cathie Wood, the founder of Ark Invest, has continued to invest in SpaceX's stock as the price continues to decline. In a recent move, her firm has publicly endorsed the company, highlighting its role in the space economy. She credits SpaceX's advancements in reusable rocket technology and the ongoing reduction in operational costs as key factors. Ark Invest has been scooping up SpaceX Across its various exchange-traded funds (ETFs), Ark Invest bought 229,651 shares of SpaceX on July 27 and 28.
Ark Invest recently described SpaceX as a 'critical unlock' for space infrastructure. The firm believes that the company has the potential to achieve 'hundreds of billions in gross profit' by 2030. This projection is primarily due to its ambitious plan to deploy a large number of satellites in the coming years. SpaceX is a top holding of multiple Ark Invest ETFs, most notably its flagship fund, the ARK Innovation ETF (NYSEMKT: ARKK), which owned about $283 million in SpaceX stock as of July 31.
Wood specifically highlighted the rapid expansion of SpaceX's broadband capabilities. According to Ark's analysis, the company plans to send tens of thousands of rockets into low Earth orbit in the near future. This initiative could significantly transform the space industry. Wood has been a vocal supporter of SpaceX, saying she thinks it 'could become the most important company in history, and I mean in global history.'
Even with the recent drop in price, SpaceX still has a high price-to-sales ratio of 77. This ratio is higher than that of the most expensive stock in the S&P 500, Palantir Technologies, which has a price-to-sales ratio of 57. Palantir is known for its strong profitability, but SpaceX has reported substantial losses in its most recent financial report. The ARK Innovation ETF has lost 41% over the last five years, so Wood's picks don't always work out.
Ark maintains that the valuation could still be justified if the company achieves its projected gross profit by 2030. Wood is known for her support of innovative technology companies, including Tesla and various early-stage artificial intelligence ventures. However, her investment decisions have not consistently yielded positive returns. The ARK Innovation ETF has done poorly lately, losing 41% of its value over the trailing five years. The S&P 500 has gained 70% over the same time period.
Ark Invest's Fund Performance
Ark's flagship exchange-traded fund, the Ark Innovation Fund, has underperformed this year, despite the broader S&P 500 index showing gains. Some of the fund's holdings, like Block and Robinhood Markets, have faced a loss of investor confidence. This highlights the challenges Ark has faced in maintaining strong performance across its portfolio. The ARK Autonomous Technology & Robotics ETF (NYSEMKT: ARKQ) owned about $113 million.
On the other hand, investments in companies like Nvidia and Palantir have experienced growth in line with the momentum of artificial intelligence. These successes reflect the potential for high returns when investing in emerging technologies. Ark Invest also bought 68,145 shares of Tesla during the same time period, investing a total of $47.3 million in the two Musk-led companies.
Wood's investment approach is characterized by high risk and high reward, a pattern that has been evident in many of her previous investments. The current question for investors is whether SpaceX is a sound buy at its current price or if it remains overvalued. While the stock is down, it is still considered expensive, and the company is far from reaching profitability. The insider lockup period for SpaceX starts to expire on Aug. 6, 2026, with restrictions expiring in tranches through Dec. 8, 2026. The lockup expiry will also generate selling pressure, as it stands to reason that insiders will want to take some profits.
The current situation raises the question of whether it's the right time to invest in SpaceX. Despite the drop in price, the stock remains costly compared to other market participants. Investors are advised to wait for signs that the valuation becomes more attractive and for the company to show progress toward profitability before making a decision. Morningstar puts SpaceX's fair value at $63 per share. Still, it's an exciting company, but it's still too richly priced in my eyes.