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It is always a happy occasion when a newly listed company reports its quarterly earnings for the first time, and they beat analysts’ expectations. SpaceX did that on Tuesday. But if ever there were a case to be made that quarterly financial statements are pointless — a view proposed by the US market regulator — Elon Musk’s rocket maker surely strengthens it.
SpaceX did better than analysts expected on most of the measurements that matter. Revenue increased by 92 per cent year on year; losses narrowed, mostly because of its profitable satellite communications business, Starlink. This is somewhat face saving for Musk, after the 44 per cent fall in SpaceX shares from their peak in June.
What has happened to SpaceX’s finances over the past three months is, though, pretty much irrelevant. The company’s long-term goals, after all, include colonising Mars, asteroid mining and building a “mass accelerator” — a kind of giant magnetic catapult — on the Moon. Right now, its income is derived from selling broadband and renting data centres, activities that accounted for just 14 per cent of the “total addressable market” Musk sketched out in SpaceX’s prospectus.
The scale of hoped-for growth makes a mockery of short-term shifts. SpaceX’s top-billing IPO underwriter, Goldman Sachs, reckons its revenue will go from an annualised $31bn now to $846bn in five years. Along the way, it may notch up a cumulative $350bn or so in negative free cash flow. Musk, for what it’s worth, foresees $1tn of revenue by 2030. Who cares what happens between now and September?
There are more useful signposts, of a non-accounting variety. One is the progress of SpaceX’s reusable Starship rocket, which completed its 13th test flight last month. Musk has yet to both launch his vessel and catch its cargo-carrying section on its return but plans to do so by the end of this month. Getting Starship right is a more useful step towards realising Musk’s space dreams than any revenue milestone.
With so much of SpaceX’s value resting in things that don’t yet exist, valuing the company is a crapshoot. Look, for example, at the wide spread of analysts’ price targets. The 34 collated by Bloomberg have a “coefficient of variation” — an indication of how scattered they are — of 50 per cent. Apple, Nvidia and Meta Platforms score 15 per cent. At the more predictable end, the largest US retailer Walmart comes in at 8 per cent.
Even if current financials did give some inkling of SpaceX’s prospects, they would offer no clues about the other big variable in the company’s valuation: a potential merger with $1tn sister company Tesla. Musk denies plans to crunch his space ventures together with his electric-car maker, but even some of his underwriters have openly mused on the possibility; JPMorgan called the idea “compelling”.
The terms of a Tesla merger, or its timing, are unknowable; if it happens, Musk’s controlling stake could make other shareholders’ views mathematically meaningless. That kind of unpredictability makes short-term profit swings seem even more trivial. Ditching quarterly earnings may not be a great idea for the US market overall but, for SpaceX investors, it’s hard to see what difference it would make.
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