Key Points
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SpaceX believes its total addressable market could top $28.5 trillion.
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CEO Elon Musk believes that by 2031, the company could already be generating over $1 trillion in revenue.
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The stock’s inflated valuation means expectations will likely be extremely high for the business.
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The growth potential behind Space Exploration Technologies (NASDAQ: SPCX), also known as SpaceX, is tremendous, and that’s a big reason investors have been loading up on it despite it having a high market cap of around $2 trillion. While the business generated close to $19 billion in revenue last year, the hope and expectation is that SpaceX’s top line will become much more massive in the future.
CEO Elon Musk recently made a very bold prediction about how big it will be in the future. And if the prediction proves to be true, SpaceX’s stock could have plenty of upside.
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Musk believes SpaceX could generate over $1 trillion in revenue in about five years
Musk isn’t shy about making predictions and ambitious forecasts, but the one he made recently about SpaceX stands out significantly. In a recent social media post, Musk said he “would be surprised” if the company’s revenue wasn’t greater than $1 trillion by 2031.
That translates into a growth rate of around 5,300% in the company’s top line, equating to a compounded annual growth rate of about 94%. That means between now and 2031, the company would be roughly doubling its revenue every year. It’s a tall task for any company, but with SpaceX estimating that its total addressable market may top $28.5 trillion and be among the most actionable “in human history,” it’s perhaps not all that surprising that Musk would have such lofty targets.
Amazon and Walmart are currently the top two companies when ranked by revenue, with the former generating just under $717 billion last year and the latter not far behind at $713 billion. If SpaceX reaches $1 trillion, it could blow past those stocks.
SpaceX still has a lot to prove
Although the expectation is that SpaceX will generate significant growth, that hasn’t been happening yet, at least not at the scale Musk has forecasted. Last year, the company’s revenue rose by 33%, and the year before that the growth rate was 35%. SpaceX would have to significantly ramp up its operations to grow at the pace Musk expects.
Musk has made ambitious forecasts before, only for them to fall short, so investors should take any projections with a grain of salt. While there are plenty of opportunities for SpaceX and its varied businesses, investors should be careful not to assume SpaceX will be as big as Musk expects it to be in the near future. With a tremendously high valuation, investors and analysts are likely to have high expectations for the stock as it is. For now, I’d steer clear of it, as there could be plenty of room for the stock to decline if it falls short.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
