Key Points

• SpaceX stock is growing rapidly, but it is also priced at a premium.

• The company needs to continue this growth for several more quarters.

• 10 stocks we like better than Space Exploration Technologies ›

Space Exploration Technologies (NASDAQ: SPCX) is one of the more interesting stocks on the market. While it went public with a lot of fanfare, some investors are still skittish about whether it's a good investment. Furthermore, the stock has nearly risen back to its initial price, so some investors are also wondering whether it's time to get out.

Let's take a look at SpaceX's business and see whether it's worth holding on to or if there are better alternatives.

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SpaceX is still in its early stages

SpaceX breaks its business into three parts: space, connectivity, and artificial intelligence. While the company's name may suggest it's a space-at-all-costs company, its financials don't reflect that. During the second quarter, space was its smallest revenue segment, generating $962 million. Connectivity and AI generated $4.3 billion and $2.6 billion in revenue, respectively. That clearly shows that space isn't all that important right now, and that's OK.

SpaceX isn't abandoning its dreams and aspirations; it's just focusing on where the best opportunities to make money are right now. The company's ultimate goal is to develop the space economy, but it sees the best way to fund it as growing its connectivity and AI offerings.

This pattern will likely persist, as there is massive demand for SpaceX's Starlink internet service and the Grok AI model. Both of these segments are doing great, with AI's revenue increasing 213% year over year, while connectivity grew a fair bit more slowly at 66%. Companywide, SpaceX delivered 92% revenue growth during Q2, so it has plenty of growth to keep investors interested.

However, there's another important consideration: the stock's price tag. SpaceX stock is very expensive. Wall Street analysts estimate SpaceX will generate $44.8 billion in revenue this year. Today's $2 trillion market cap prices the stock at 45 times 2026 estimated sales. That's a very high price to pay for any stock, let alone one of the world's largest companies.

Most companies in the trillion-dollar club don't even trade at 45 times earnings, let alone sales. Even if SpaceX could snap its fingers and become profitable with a very impressive 50% profit margin, the stock would trade for a very expensive 90 times earnings.

So, what should investors do? I think I'm in the middle. I'm not convinced SpaceX is a buy right now, but I also think there's enough there not to make it a sell. I think the best course of action is to hold onto shares or sit on the sidelines if you don't own any. That way, you can observe what it does over the next year to get a better idea of whether SpaceX stock is worth buying.

Should you buy stock in Space Exploration Technologies right now?

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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.