Al Root
Like him or not, it's hard to dispute that Elon Musk generates some incredible numbers. Take SpaceX. It's on the cusp of becoming another Tesla -- a trillion-dollar entity dwarfing competitors in an established industry.
Earlier in the week Musk appeared to confirm that SpaceX was on track for a 2026 IPO, which would provide capital to accelerate AI data centers in space and value SpaceX at up to $1.5 trillion.
That's roughly as much as Tesla and, if it happens, will flummox traditional aerospace and defense analysts just like Tesla's valuation can upset traditional car people.
It takes about a dozen global auto makers, including the likes of Toyota Motor, BYD, Ford Motor, General Motors, Hyundai Motor, Volkswagen, and others, to equal roughly half of Tesla's market value. Half.
The aerospace market isn't quite the same. Still, it would take about a dozen aerospace companies including Boeing, Airbus, Lockheed Martin, RTX, Rolls-Royce, and others to equal SpaceX's potential IPO valuation.
Musk is the driving force behind two companies worth multiples of the rest of the industries they are disrupting.
There are a couple of lessons for investors from that idea. For starters, the stock market values growth above all else. Traditional car makers, many of which are more profitable than Tesla, trade for single-digit price-to-earnings ratios because their earnings don't grow rapidly or consistently.
Tesla trades for roughly 200 times estimated 2026 earnings because investors expect explosive earnings growth from its nascent AI business. Tesla uses AI computing to train cars to drive themselves and robots to complete useful tasks.
SpaceX might be valued at 50 times sales because of the growth potential in its Starlink space-based broadband business, which has more than 8 million customers, and because of the potential for AI computing in space.
The second lesson for investors is that growth investors and value investors are not the same people. Funds that own GM stock don't typically own Tesla shares. And funds that want to invest in SpaceX are more likely also to own Palantir Technologies than Boeing. (Palantir trades for almost 200 times estimated 2026 earnings.)
It does little good for value investors to complain about growth stock valuations. To be sure, stocks can be overvalued, but evaluating SpaceX like a traditional aerospace company heading into its IPO won't work.
Doing so means essentially taking a pass on the IPO. That's fine, too. Not everyone has to like every stock and SpaceX will have plenty of interest among growth investors.
As for Musk, he owns an estimated 40% of SpaceX. A $1.5 trillion valuation would make him another $400 billion or so. It isn't a trillion, but it's a lot.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
Al Root
Like him or not, it's hard to dispute that Elon Musk generates some incredible numbers. Take SpaceX. It's on the cusp of becoming another Tesla -- a trillion-dollar entity dwarfing competitors in an established industry.
Earlier in the week, Musk appeared to confirm that SpaceX was on track for a 2026 IPO, which would provide capital to accelerate AI data centers in space and value SpaceX at up to $1.5 trillion.
That is roughly as much as Tesla and, if it happens, will flummox traditional aerospace and defense analysts just like Tesla's valuation can upset traditional car people.
It takes about a dozen global auto makers, including the likes of Toyota Motor, BYD, Ford Motor, General Motors, Hyundai Motor, Volkswagen, and others, to equal roughly half of Tesla's market value. Half.
The aerospace market isn't quite the same. Still, it would take about a dozen aerospace companies, including Boeing, Airbus, Lockheed Martin, RTX, Rolls-Royce, and others to equal SpaceX's potential IPO valuation.
Musk is the driving force behind two companies worth multiples of the rest of the industries they are disrupting.
There are a couple of lessons for investors from that idea. For starters, the stock market values growth above all else. Traditional car makers, many of which are more profitable than Tesla, trade for single-digit price-to-earnings ratios because their earnings don't grow rapidly or consistently.
Tesla trades for roughly 200 times estimated 2026 earnings because investors expect explosive earnings growth from its nascent AI business. Tesla uses AI computing to train cars to drive themselves and robots to complete useful tasks.
SpaceX might be valued at 50 times sales because of the growth potential in its Starlink space-based broadband business, which has more than eight million customers, and because of the potential for AI computing in space.
The second lesson for investors is that growth investors and value investors aren't the same people. Funds that own GM stock don't typically own Tesla shares. And funds that want to invest in SpaceX are more likely also to own Palantir Technologies than Boeing. (Palantir trades for almost 200 times estimated 2026 earnings.)
It does little good for value investors to complain about growth stock valuations. To be sure, stocks can be overvalued, but evaluating SpaceX like a traditional aerospace company heading into its IPO won't work.
Doing so means essentially taking a pass on the IPO. That is fine, too. Not everyone has to like every stock, and SpaceX will have plenty of interest among growth investors.
For those investors, they can look at shares of EchoStar. It owns some $11.1 billion worth of SpaceX stock at a valuation of roughly $400 billion. Shares were up 0.8% in early trading Friday at $105.24, while the S&P 500 was down 0.2% and the Dow Jones Industrial Average was up 0.3%.
As for Musk, he owns an estimated 40% of SpaceX. A $1.5 trillion valuation would make him another $400 billion or so. It isn't a trillion, but it's a lot.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 12, 2025 10:26 ET (15:26 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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