The hottest IPO of the year, Space Exploration Technologies Corp. (NASDAQ:SPCX), has struggled since the shares were made available for trading. They are down by 12% since the close on the first day of trading and have gained six points over the IPO price of $135. Cramer has discussed Space Exploration Technologies Corp. (NASDAQ:SPCX) several times since the IPO and commented on the firm’s deep pockets being able to fund its ambitious plans. On August 6th, the CNBC TV host defended his latest opinions about the firm:
“But let’s spot SpaceX today, I did a big piece last night saying, for your grandchildren, buy it. Absolutely. Cause the things he talked about, like there’s this one period where he just says, listen, I know this is going to sound nuts, but we’re going to do a lot of Moon work. I think there’s a, generation, that’ll come up and say, yeah, that makes a lot of sense, it’s a lot safer and cleaner than doing it here.
“I mean look, if you’re in SpaceX, you probably, we don’t know where it all went. that was part of the problem. I talked to people saying, listen, I own it in a special vehicle, and I didn’t know how much I had. But when you look at that short position, okay, what really matters is, you know that there were people who said, I want to lock in that thing. Which is why it’s not a disaster, after 900 million shares. Because the short position is down 19%. Now, it’s important for people to understand, first quarter, you can’t really short it. Some people say you’re not even allowed to, and if they see it, the brokers will unwind it. This one, no one forced anyone to unwind the short. They all looked the other way. . . no one cancelled the short here.”
Cramer’s remarks cover the central debate of Space Exploration Technologies Corp. (NASDAQ:SPCX), which is whether the firm will be able to meet its ambitious AI goals. While it started out as a rocket company aiming to make reusable launch vehicles, Space Exploration Technologies Corp. (NASDAQ:SPCX) now markets itself as an AI infrastructure provider. AI was at the core of the firm’s second quarter earnings as infrastructure agreements allowed revenue to jump by 92% annually to $7.81 billion. Not only are the bulls optimistic about the AI potential, but they also point towards Space Exploration Technologies Corp. (NASDAQ:SPCX)’s massive moat in the reusable rocket and satellite internet businesses.
However, the bears point towards large capital expenditures required to fuel the growth. For instance, in its Q2 earnings, Space Exploration Technologies Corp. (NASDAQ:SPCX) outlined that it spent a whopping $18.4 billion in capital expenditure during the quarter. The bears also point out that the firm generated a $1.9 billion operating loss in the second quarter. Additionally, they add that since Space Exploration Technologies Corp. (NASDAQ:SPCX) is now a conglomerate, the firm is relying on its cash generating businesses to fund its loss makers. A high valuation, suggested by a price-to-sales ratio of 60, also makes the bears nervous.
While Insider Monkey acknowledges the risk and potential of SPCX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than SPCX that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
