If you invest $5,000 in SpaceX today, here's how much it could turn into by 2030
SpaceX stock might have tumbled since its impressive Initial Public Offering (IPO), and investment experts aren't too confident in the potential for the company despite progress in the space sector, suggesting that it might be wise to stay away if you're considering the prospect.
Some might see the declining valuation of SpaceX over the last three months as a challenge or risk worth taking, yet experts at The Motley Fool believe that a $5,000 investment in Elon Musk's company right now would significantly decline in value.
Even optimistic scenarios would see the price-to-earnings ratio (P/E) of the private space agency reach around 18.5 by 2030 – staying considerably below the the S&P 500 index's average P/E of 30 – indicating that the per-share valuation would drop from roughly $140 today to around $100 in four years time.
This would translate a $5,000 investment now into a loss in years to come, leaving you with an investment worth around $3,571 that you probably should have ditched when you had the chance.
Why will SpaceX's stock valuation decline?
One key factor that could continue to send SpaceX's stock market valuation on a downward trend is the dilution of the company's share count, as further secondary stock offerings and employee compensation is almost guaranteed to drive the price lower.
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It makes sense as more shares across the same valuation means a smaller slice of the pie for everyone — and there's no bigger elephant in the room than Elon Musk's record-breaking pay package.
This would especially be the case if he chose to exploit a 'loophole' and merge SpaceX with Tesla, as the combined company's shares would be weakened on an individual level despite being stronger in the macro.
There is also the case that SpaceX simply settles to a more realistic level without overconfidence or excitement from investors, as it was widely agreed that its launch price was well beyond what would usually be the case on the market.
While a correction happened quickly on the market, there could be a slower movement downwards over the next couple of years as investors either lose interest or expectations settle down.
Could things turn around for SpaceX?
You simply never know with the stock market though, and there have been enough dramatic turnarounds in the last few decades for anything to be possible, making this prediction merely a reflection of where things could go if things continue as they are.
As a space agency the efforts towards the Moon and Mars remain critical to the success of SpaceX, and while we likely won't make any progress towards the latter before 2030, the same might not be the case for the former with Musk's company potentially vital to the establishment of a permanent lunar base.
This could drive the price up considerably if the Moon suddenly becomes a vital economic hub, and that initial $5,000 investment could turn into a massive win for those who believed in the company.
Additionally, continued expansion of Starlink services across both satellites and cell networks could also provide a major boost to SpaceX, but whether that bears fruit in only a couple of years is unclear, and some might even say unlikely.