Rising energy prices and higher interest rates are making investors worry about a possible market crash. Market sell-offs are a normal part of investing and can create opportunities for investors who are willing to hold stocks for the long term.
One space company that could attract attention during a major market decline is Space Exploration Technologies, better known as SpaceX. The Motley Fool said it would consider buying more SpaceX shares if a market crash pushes the stock lower.
SpaceX stock and market crash
SpaceX has been a highly volatile stock since it went public in June. If a broader market crash causes SpaceX shares to fall sharply, the decline could give long-term investors a chance to buy at a lower price, according to The Motley Fool.
SpaceX has built its business around reusable rockets and a vertically integrated model. Its reusable technology allows the company to launch rockets again instead of building a completely new rocket for every mission.
Reusable rockets cut costs
Reusing rockets has helped SpaceX reduce launch costs. It has also allowed the company to carry out multiple launches in a shorter period compared with older space-launch technology.
{{/usCountry}}Reusing rockets has helped SpaceX reduce launch costs. It has also allowed the company to carry out multiple launches in a shorter period compared with older space-launch technology.
{{/usCountry}}SpaceX's reusable Falcon 9 rocket has helped the company build a large satellite network in low Earth orbit, or LEO. The company uses this network to provide internet services to customers through Starlink.
Also read: Why is SpaceX stock up 0.3% as Starship launch targets cheaper Starlink capacity?
Starlink drives SpaceX revenue
Starlink and other satellite connectivity services are currently the biggest money-making part of SpaceX's business. During the first half of the year, this segment generated $7.55 billion in revenue. The satellite connectivity business also reported $2.84 billion in GAAP operating income during the first six months of the year. These figures show how important Starlink has become to SpaceX's overall business.
SpaceX space business losses
SpaceX's other businesses are much more expensive to operate and are currently generating losses. Its space segment, which includes launch services, made $1.58 billion in revenue during the first half of the year.
Despite that revenue, the space segment reported an operating loss of $1.2 billion. The Motley Fool said high research and development costs linked to the Starship rocket and Starbase infrastructure are a major reason for the losses.
SpaceX AI spending
SpaceX is also investing heavily in artificial intelligence, but the AI business is currently putting pressure on the company's earnings. The segment generated $3.38 billion in revenue over six months. At the same time, SpaceX's AI segment reported an operating loss of $3.73 billion. The company is spending heavily to expand its computing capacity, which requires large upfront investments in research, development and infrastructure.
SpaceX stock valuation
Overall, SpaceX lost more than $2 billion in the first half of the year as it continued spending heavily on research and development and on building its Starship and AI infrastructure, according to The Motley Fool.
SpaceX's high spending is also reflected in its stock valuation. The Motley Fool said the company was trading at around 94 times sales, showing that investors are already pricing in strong future growth.
A major part of the long-term investment case is Starship. SpaceX is developing Starship as a fully reusable rocket, which could potentially reduce launch costs even further if the system reaches its expected capabilities.
Also read: SpaceX's Starship reaches orbit after engine issue, to deploy 26 Starlink satellites
Starship rocket plans
Starship is also designed to carry a much larger payload than Falcon 9. Its payload capacity is expected to be more than six times that of Falcon 9, giving SpaceX a much bigger vehicle for future space missions. SpaceX is also expanding the next generation of its Starlink satellites. A larger and more advanced satellite network could help the company expand its internet and satellite-related business.
SpaceX Starshield growth
Another potential growth area is Starshield, SpaceX's satellite service aimed at US national security and defense needs. SpaceX is using its existing satellite network to pursue contracts in this area.
However, SpaceX remains a high-risk investment because it is highly volatile and requires huge amounts of capital. The company's large spending on Starship, AI infrastructure and other projects could continue to weigh on its financial results in the near term.
SpaceX stock buying opportunity
The Motley Fool's argument is that a major market decline could change the risk-reward picture for SpaceX shares. If a market crash pushes the stock significantly lower, the lower price could become an opportunity for investors who believe in SpaceX's long-term growth.
The broader investment case depends on whether SpaceX can turn its heavy spending into stronger businesses over time. Starlink is already generating significant revenue and operating income, while Starship, AI and Starshield could provide additional growth if their investments produce the expected results.
For investors considering SpaceX after a market crash, the key issue would therefore be the company's long-term growth potential versus its high valuation, large expenses and stock volatility. The Motley Fool said it would buy SpaceX shares after a meaningful decline because of its long-term bullish view of the space economy.