Our Stock of the Week is SpaceX (SPCX). SpaceX launches rockets, sells satellite internet through Starlink, and since its acquisition of xAI earlier this year, rents out computing power to other companies and runs the Grok chatbot. After its much ballyhooed IPO in June at $135, shares hit an intraday high of $225.64, traded down near $105 over the summer, and have spent the interim making progress off lows. We hold it as a core position and are looking to build that position and trade it.
For some context, SpaceX reported its September quarter last Tuesday evening and beat in every segment. Revenue rose 161% to $14.6 billion (vs. est. $12.8 billion) and net income was $4.4 billion, versus a $1.1 billion loss a year earlier. The computing business, which the company calls Super Intelligence, turned an operating profit and for the first time passed Starlink as the largest source of revenue. Starlink added 1.6 million subscribers to reach 13.6 million, with monthly revenue per user up 5% from the prior quarter, and the company guided to $33 billion to $37 billion of revenue in the first quarter of next year, which would be more than twice what it just reported.
Notably, that growth has (and will continue to) require substantial spending. SpaceX spent about $48 billion on capital expenditures through the first nine months against about $13 billion of operating cash flow, and guided to $35 billion to $40 billion in the fourth quarter, nearly double the third quarter’s $19.6 billion. Over the weekend, Elon Musk said SpaceX closed $40 billion of debt financing for chips arriving in the first half of next year, citing the company’s investment-grade status and its Starlink and launch revenue, and added that debt markets have largely shut off access for AI companies without that kind of revenue, which means that SPCX is able to borrow when many of its competitors can’t.
The stock jumped about 8% on Wednesday morning after the report but was back below where it started by Thursday’s close, despite no new information. However, both META and TSLA fell despite solid reports, while LRCX’s disappointing outlook weighed on chip stocks, and by Thursday hedge funds were cutting AI exposure across the board. Analysts, however, remained optimistic, with JPMorgan, Cantor Fitzgerald, and Barclays raising their targets to $500, $345, and $300, respectively. The average target sits near $258 against a stock around $147. Some investors won’t own the stock because of Musk, and some are short it, which can add buying pressure when the news is good. One date to keep in mind is December 8, when the full 180-day lockup expires and frees insiders and early investors to sell. The earlier unlocks were absorbed well, partly because many institutions skipped the IPO and have been waiting to buy that supply.
Technically, short-term support sits around $144, where the stock bottomed Thursday before bouncing Friday, and the bigger level is the $140 area that has held since September. MSFT and GOOGL both report Wednesday after the close and AMZN reports Thursday, with the Fed decision in between. If those reports bring another round of selling in the AI group, we’d look to add on a dip toward $144 and then $140. A close under $140 on heavy volume would tell us the group selling has become something more, and we’d stop adding until it stabilizes.
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This post is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this post. Do not buy, sell, or trade the stocks mentioned herein. We WILL actively trade this stock differently than discussed herein. We will sell into strength and buy or sell at any time for any reason. We will actively trade into any unusual activity. At the time of this post, principals, employees, and affiliates of Shark Investing, Inc. and/or principals, clients, employees, and affiliates of Hammerhead Financial Strategies, LLC, directly or indirectly, controlled investment and/or trading accounts containing positions in SPCX at the time this was published. To accommodate the objectives of these investing and/or trading accounts, the trading in these shares will be contrary to and/or inconsistent with the information contained in this posting.
