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SpaceX (SPCX), which I’ve long called the most overvalued large-cap stock of all time, reported earnings yesterday after the close…
And even the greatest stock promoter of all time, CEO Elon Musk, couldn’t keep the shares from tumbling as much as 13% early this morning.
Year over year, revenue grew 92% – from roughly $4.1 billion to $7.8 billion. Meanwhile, losses from operations narrowed from about $970 million to $143 million. And “Segment Adjusted EBITDA” (earnings before interest, taxes, depreciation, and amortization) grew from around $1.2 billion to $3.5 billion.
SpaceX also said that cash provided by operating activities rose from roughly $351 million to $3.5 billion. However, the company only reported “Selected Cash Flow Information” for the first six months of this year versus that period last year – which is totally unacceptable for one of the most valuable companies on the planet.
Take a look at this breakdown from page 10 of the earnings release:
So why did the stock take such a hit?
Massive Capex Spending Swallows Cash Flows
In part, it’s because of a massive increase in capital expenditures (“capex”) – largely in the company’s AI division (which includes chatbot Grok and social media platform X).
Take a look at the breakdown here on page 3 of the release:
The company’s roughly $28.5 billion capex amounted to more than 8 times its $3.5 billion operating cash flow. As a result, SpaceX’s free cash flow (“FCF”) was a horrific negative $25 billion in the first six months of the year.
This is consistent with what I wrote in my June 5 e-mail. SpaceX has two great businesses and one terrible one:
… the company’s gem is Starlink. It more than doubled its subscriber count from the first quarter of 2025 and is highly profitable…
Though it lost money in the first quarter, the space-launch business is also unparalleled. It accounts for more than 50% of all worldwide orbital launches and more than 80% of all mass sent into orbit.
But a totally unrelated segment, xAI, is dragging down these two great businesses. It’s burning huge amounts of cash in an attempt to keep up with its much larger competitors – not just [Alphabet’s (GOOGL)] Google but also Meta Platforms (META), Amazon (AMZN), and Microsoft (MSFT), among others.
SPCX Float Creates a Drag on its Share Price
Another major factor weighing on the stock is that the number of SpaceX shares that are eligible to trade (its so-called the “float”) nearly tripled. SpaceX sold 555.6 million shares in its June 12 IPO at $135 each – raising about $75 billion while valuing the company at roughly $1.77 trillion.
Under the IPO prospectus, up to 911.5 million shares – about 20% of the early-release eligible pool held by employees and most pre-IPO investors – become transferable just after the first earnings report.
At SpaceX’s price early this morning, that’s around $100 billion of stock.
I have to imagine that many holders will be eager to sell to diversify – especially in light of the stock’s absurd valuation.
And that’s the main problem with SpaceX’s stock…
With a tiny float of 4% to 5% since the June 12 IPO and a huge $500 million payoff to the Wall Street banks – whose analysts of course debased themselves pumping it (as I covered in my July 9 e-mail) – the stock was manipulated to the moon.
What SpaceX Might Actually Be Worth
The company just reported around $7.8 billion in quarterly revenue. Annualized, that comes out to roughly $31.4 billion.
But on the conference call, Musk said SpaceX will reach a $100 billion annual revenue run rate (“ARR”) by the end of the year thanks to AI compute deals.
This is as ridiculous as his claim a year ago that, by the end of 2025, Tesla (TSLA) would be serving half of the American population with fully autonomous robotaxis. The actual number at year end was roughly 15 robotaxis in one city – Austin, Texas.
Being extremely generous, I’ll give SpaceX a $50 billion ARR by year-end and an equally generous multiple of 10 times revenue. That’s $500 billion.
The stock price decline early this morning put the market cap at around $1.5 trillion. That would mean the stock would be overvalued by at least 3 times – by roughly $1 trillion.
I continue to believe that SpaceX is the most overvalued large-cap stock ever.
Editor’s Note: This article was adapted from today’s edition of Whitney Tilson’s Daily. Every day, Whitney emails his readers with his comments on the most important topics of the day, including stocks he’s investigating… great articles he has read… his media and podcast appearances. You can sign up here to receive all of Whitney’s daily thoughts and insights.
