Keithen Drury, The Motley Fool
5 min read
Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, has a CEO who is known for making extraordinarily optimistic predictions about his companies’ futures. Elon Musk keeps offering these sky-high projections, even though his companies frequently fail to deliver. However, he’s not always as far off as people think, and his latest projection is simply jaw-dropping.
During SpaceX’s third-quarter earnings call, he claimed that it wasn’t out of the question for the company to achieve annual recurring revenue of $500 billion to $1 trillion by the end of 2027. A result like that could easily vault SpaceX’s market cap to the world’s largest, but what would the stock price be?
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SpaceX could become a $10 trillion company if Musk’s call is correct
For argument’s sake, let’s say that SpaceX can somehow generate $1 trillion in annual recurring revenue (ARR). Now, the language that Musk used is important, because hitting that target would not require SpaceX to produce $1 trillion in total revenue in 2027. What it would need to do is achieve annualized recurring revenue of that level in the fourth quarter. So, what investors would be hoping for is for its “super intelligence” (SI) segment (formerly called the artificial intelligence segment) to reach about $250 billion in quarterly revenue by Q4 of next year.
Should SpaceX hit the $1 trillion ARR mark and trade at 10 times sales (that’s about average for most big tech companies), that would give it a market cap of 10 trillion. Right now, Nvidia, the world’s largest company, has a $5.3 trillion market cap, while SpaceX is a $1.9 trillion company trading for about $138 per share. So, if the $10 trillion market projection came true, SpaceX’s stock price would rise from about $138 to about $736. That would be a monster gain in just a year or two, but that implies some pretty incredible growth figures.
Is this even possible?
SpaceX’s growth rate must be very quick to hit this level
What’s spurring Musk to give this projection is the incredible growth that its SI division delivered in Q3. It grew 830% from $813 million last year to $7.56 billion this year. So, what happens if SpaceX’s revenue grows 830% again by this time next year? That would amount to about $70 billion in revenue.
