For years, if you wanted a piece of Elon Musk’s vision, buying Tesla shares was the only way. That’s changing now with SpaceX planning an Initial Public Offering (IPO). This shift could be risky for Tesla investors.
With SpaceX entering the market, Wall Street analysts worry that money may flow away from Tesla. “This cannot be a positive for Tesla,” says Joe Gilbert, a portfolio manager at Integrity Asset Management. He thinks Musk’s attention will shift primarily to SpaceX, which he sees as Musk’s newest passion.
Tesla’s performance has been mixed. Sales growth is slowing, and some believe the company is in a decline. Tesla shares are still pricey, trading at about 196 times their expected earnings. Investors hope Musk will turn Tesla into an autonomous vehicle and robotics leader, but competition is fierce. Companies like Waymo are already in the robotaxi race, and China has many rivals in the electric vehicle space.
Despite this, Tesla remains a giant with a market cap of $1.5 trillion. In contrast, leading competitors like Rivian and Uber are valued at just $170 billion combined.
SpaceX stands apart from Tesla. Its growth potential seems vast, and analysts expect a high valuation when it goes public. Gilbert believes SpaceX might surpass Tesla in market cap, as it operates in a field with fewer competitors.
Retail investors, often enthusiastic for Musk’s ventures, are showing signs of fatigue. Recent data from Vanda Research shows only modest buying activity in SpaceX shares. Approximately 40% of Tesla shares are owned by retail investors. The upcoming SpaceX IPO may dilute their focus on Tesla. BNP Paribas analyst James Picariello warns this could split the pro-Musk investor base.
However, some believe SpaceX’s IPO could strengthen the overall “Musk ecosystem.” “Investors who believe in Musk’s vision will want exposure to both,” says Dave Mazza of Roundhill Financial, suggesting that while SpaceX is exciting right now, both companies have their unique appeals.
Nicholas Colas from DataTrek Research thinks the effects of SpaceX on Tesla stock will unfold slowly. While Tesla benefits from being in the S&P 500, its valuation relies heavily on future prospects, rather than current financials. Colas believes 90% of Tesla’s value is based on hope rather than reality.
Given that both companies gravitate around Musk’s vision, some experts suggest a merger may be logical. Keeping them separate might benefit SpaceX more because it holds a clearer edge in its market.
In short, investors are preparing for a shift as Musk expands his empire. Both Tesla and SpaceX are significant players in their fields, and watching how they evolve will be fascinating.
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Elon Musk, SpaceX, Joe Gilbert, Bloomberg, Nicholas Colas, Tesla Inc, SpaceX IPO
