Cathie Wood Is Buying SpaceX Stock as it Sinks 50% Below Its Post-IPO High. Should You Follow Her?
Space Exploration Technologies (SPCX -3.41%) was the initial public offering (IPO) in history, collecting more than $86 billion, or more than double the previous record holder, Saudi Aramco, which raised $25.6 billion in 2019.
However, the stock’s trajectory since then hasn’t been quite as promising as investors had hoped. After hitting a high of $225 a week after the IPO on June 20, the stock is down 50% from that price.
Is this an opportunity to buy the stock on the dip? Cathie Wood thinks so. Her company, Ark Invest, has been scooping up shares of the beleaguered stock lately. Should you follow her lead?
Why Cathie Wood loves SpaceX
Wood was praising SpaceX well before it went public. She offered it to investors pre-IPO through her private equity fund, the Ark Venture Fund, which also provides access to other private companies, such as OpenAI, Anthropic, and Stripe.
In a commentary posted on the Ark Invest website, Wood’s company has praised SpaceX as the “critical unlock for the space economy” because it is perfecting the reusable rocket, and costs continue to decline as the technology improves.
SpaceX anticipates sending tens of thousands of rockets into low Earth orbit over the next few years, and Ark sees accelerating broadband capacity as giving SpaceX the potential for “hundreds of billions of dollars in gross profit by 2030.”
This is likely why SpaceX’s astronomical valuation doesn’t bother her. Even at today’s lower price, SpaceX stock trades at a price-to-sales ratio of 77, higher than the most expensive stock in the S&P 500 on a price-to-sales basis, Palantir Technologies, at 57. And Palantir is highly profitable, while SpaceX is reporting high losses.
If it can indeed generate massive gross profit by 2030, it should be able to carry a high premium.
Space Exploration Technologies
Today’s Change
(-3.41%) $-3.83
Current Price
$108.37
Key Data Points
Market Cap
Day’s Range
$107.57 – $113.64
52wk Range
$107.01 – $225.64
Volume
58.8M
Avg Vol
115.3M
Is it time to buy SpaceX stock?
Wood loves disruptive tech stocks, which she sees as driving the future. She was an early Tesla fan and clearly admires Elon Musk for his vision and technical execution.
Her company markets several funds, most of which are traded as exchange-traded funds (ETFs), and their performance has been spotty. Her picks, like Tesla, are high-risk, high-reward. Some have laid the groundwork for artificial intelligence (AI) and skyrocketed, such as Nvidia and Palantir, while others have lost market confidence, such as Block and Robinhood Markets.
In general, growth stocks outpace value stocks in a strong bull market, but Ark’s flagship ETF, the Ark Innovation Fund, is underperforming this year despite the S&P 500’s rise.
I still think it’s too early to buy SpaceX, which is a signature component of the Ark Innovation ETF, even if you believe in its opportunities. There’s a lot of growth built into its price, and it’s a while off from turning a profit. If the valuation becomes more attractive and the company approaches profitability, you can reevaluate.
