Tesla (NASDAQ: TSLA) went public in 2010 and has delivered life-changing returns since. Given its average annualized returns of 40.11% (as of writing) since it hit equity markets, $5,000 invested in Tesla 16 years ago would be worth more than $1 million today.
Tesla’s co-founder and CEO, Elon Musk, recently took another one of his companies public: Space Exploration Technologies (NASDAQ: SPCX), and many investors have high hopes for the rocket company. Could SpaceX follow in Tesla’s footsteps and deliver millionaire-maker-level returns?
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The ingredients are there
According to some estimates, SpaceX’s IPO has turned more than 4,000 of its current and former employees into millionaires. Many of them had likely been with the company for years, during the period when it helped revolutionize space travel. SpaceX pioneered the routine reuse of orbital-class rocket boosters.
Falcon 9, the company’s primary operational rocket, has a reusable first-stage booster, a factor that has helped the company significantly reduce space travel costs. SpaceX has become the industry leader and earns revenue from contracts with government agencies and other institutions. But SpaceX isn’t done innovating.
The company is working on Starship, which is designed to be fully reusable, including both its Super Heavy first-stage booster and Starship upper-stage spacecraft. That could, once again, allow the company to reduce launch costs, leading to higher margins and profits. SpaceX has two other operating segments: one that provides internet connectivity services through a constellation of Low Earth Orbit satellites, and an artificial intelligence (AI) business that provides AI computing capacity.
Connectivity is the company’s most profitable segment. The company’s customer base and revenue in this unit are growing rapidly, and SpaceX plans to launch its next-gen Starlink satellites into orbit to serve far more customers. Further, SpaceX has signed important AI compute deals this year and sees a massive opportunity in this market. The company hopes to eventually address the limitations of hyperscalers’ AI build-out by serving its customers via AI satellites.
These plans could significantly improve the company’s already strong financial results. In the second quarter, SpaceX’s revenue grew 92% year over year to $7.8 billion, while its net loss shrank to $541 million from the $1 billion reported in the year-ago period. Analysts (on average) expect SpaceX to report earnings per share of $0.07 this year (as of writing).
