Should you buy the stock?

Space Exploration Technologies (SPCX -2.94%) posted its second-quarter financial results on Aug. 4. The company’s performance was strong. Revenue soared 92% year over year to $7.8 billion, while it almost cut its net losses in half, from $1 billion in the year-ago period to $541 million this time around. However, perhaps management commentary was even more noteworthy. And one thing in particular that SpaceX’s CEO, Elon Musk, said deserves investors’ attention. Let’s dig in.

An exciting medium-term guidance

During SpaceX’s second-quarter earnings conference call, Elon Musk talked about internal revenue projections. He said the company now expects to reach $1 trillion in revenue by 2030, up from its previous 2031 target. So far this year, SpaceX has generated about $12.5 billion in revenue. Analysts expect an average of about $44.58 billion for the full fiscal year 2026.

From there, it would need a compound annual growth rate (CAGR) of nearly 118% to reach $1 trillion in revenue in four years. That’s not entirely unheard of. Amazon (AMZN -0.18%) went public in May 1997 and reported net sales of $147.8 million that year. During its fiscal year 2001, it posted revenue of $3.1 billion, for a CAGR of roughly 114%. Still, that’s not the norm, and it would be quite an impressive achievement for SpaceX.

Should you buy the stock?

Let’s assume Musk is right and that by its fiscal year 2030, SpaceX will generate $1 trillion in revenue. Does that guarantee that the company will post excellent returns through then? Not at all. Revenue growth matters, but it’s not the only thing that determines stock price appreciation. Valuation concerns and the inability to turn a profit are important as well. SpaceX may face questions on both fronts.

The company’s price-to-sales ratio is about 64, substantially higher than the reasonably valued range, which typically starts below 2. This suggests that some of the company’s success is already baked into its share price, and even robust revenue growth might not be enough to lift the stock significantly higher. Also, SpaceX isn’t currently profitable. And although it improved on that front during the second quarter, the company is also aggressively investing in its artificial intelligence (AI)-related ambitions.

That could prevent the company from turning a profit. Even so, for a company in the growth stage, revenue growth is often the most important determinant of stock market performance. The market tends to forgive red ink on the bottom line if the top-line is growing fast enough.

So, if Musk is right, there is an excellent chance that SpaceX will crush the market through 2030. But what if he’s not? We know that Musk tends to set aggressive timelines that often get delayed. So, we shouldn’t take his projection at face value. So, what’s the verdict? There is significant uncertainty around the stock, and it could drop sharply if it runs into headwinds, given its valuation. SpaceX is too risky and too expensive at current levels. Investors should wait for a significant dip before buying its shares.