Space Exploration Technologies (SPCX -3.41%), more commonly known as SpaceX, burst onto the investing scene earlier this year in spectacular fashion. The space technology company founded by the world's richest person, Elon Musk, set the record for the largest IPO in history. SpaceX became the most talked-about stock on the planet.
However, the sizzle quickly fizzled. Over the last seven weeks, SpaceX's share price has plunged more than 40% from its peak in the immediate aftermath of its IPO. Is the worst over? I don't think so. Instead, I predict SpaceX stock is about to sink further.
Image source: Getty Images.
Why the SpaceX sell-off has been justified
I believe that the steep SpaceX sell-off has been fully justified. Quite simply, the company's valuation was well above a realistic level from the get-go. Many retail investors jumped on the SpaceX bandwagon without crunching the numbers.
When a stock is priced for perfection (and beyond), any bump in the road usually causes a significant decline. SpaceX has had three such bumps since its IPO.
First, only days after its public listing on the Nasdaq stock exchange, SpaceX announced a $60 billion all-stock acquisition of AI coding leader Cursor. This deal diluted existing shares at an inopportune time as the stock began to experience initial post-IPO selling pressure.
Second, the company was forced to abort its planned Starship launch on July 16, 2026, after several engines failed. Starship, which is designed to transport humans and cargo into space, is viewed as a key growth driver for SpaceX.
Third, when SpaceX finally launched Starship (along with its newest Starlink satellites), the company hit another snag. Although the launch was successful, the rocket booster exploded after impacting the water faster than expected during landing.
NASDAQ: SPCX
Key Data Points
More headwinds, more downside
Why do I think SpaceX stock has even more downside? The company faces additional headwinds.
One potential challenge for SpaceX arrives on Aug. 4. That's when the company is scheduled to report its second-quarter results. I'm not predicting that SpaceX will post disappointing numbers. However, investors will heavily scrutinize Starlink subscriber growth, xAI revenue, free cash flow, and capital expenditures. Even a minor sign of a problem could cause the stock to tank.
The biggest looming issue for SpaceX, though, is the expiration of its lockup period. The first lockup window opens soon after its Q2 update. As early investors begin to sell their shares, we could see downward pressure on SpaceX's share price.
How low can SpaceX go?
Morningstar (MORN -0.28%) calculated a fair value for SpaceX of $780 billion. SpaceX's market cap would have to plummet nearly 50% from its current level to reach that valuation.
Do I think it will fall that much? No. Neither does Wall Street. The most pessimistic analyst, HSBC's (HSBC -0.63%) Nicolas Cote-Colisson, thinks the space stock is already close to where it will be 12 months from now. The consensus 12-month price target for SpaceX reflects an upside of over 100%. Raymond James (RJF +0.58%) analyst Brian Gesuale is super-bullish about SpaceX, with a target of $800 -- roughly 6.8 times the current share price.
Many of Wall Street's projections are overly rosy, in my view. I stand by my prediction that SpaceX's shares will sink further, perhaps by another 20% or so.
However, I also fully expect a strong bounce once the impact of the lockup period expirations run their course. My hunch is that SpaceX will finish 2026 trading between $150 and $160 per share. If I'm right, buying now could pay off -- if you're willing to endure significant volatility.
