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SpaceX revenue hit $4.6B in 2022, up 44% from $2.3B in 2021. With about $1.5B in revenue in Q1’23, SpaceX is on course to hit $6B by the end of the year.

The company currently has about $5 billion in cash on its balance sheet.

SpaceX was valued at $150B in a July 2023 share sale by existing investors. The sale consisted of $750M of stock sold by company insiders at $81 per share, up 5% from the $77 share price at which SpaceX stock was previously sold.

That makes SpaceX more highly-valued than Boeing (BA) at $137B, Lockheed Martin (LMT) at $112B, and RTX, formerly Raytheon (RTX) at $124B.

SpaceX has been valued at $150B on approximately $5B in last 12 months (LTM) revenue, a 30x multiple. That’s compared to 2.4x for Boeing, 1.9x for Lockheed Martin, and 2.2x for RTX.

Founded in 2002, SpaceX is both an aerospace manufacturer and a space transportation services company.

The original motivation behind the company was to spur public interest in spaceflight by shipping a greenhouse to Mars and growing the first interstellar plant. The early SpaceX team tried to buy a rocket to do this in the early 2000s—after being rebuffed, they decided to build their own rocket.

SpaceX’s main value proposition in the realm of launch services is reliability at a low cost compared to the status quo. The cost of its first rocket, Falcon 1, was 1/3 the cost of the 1980s Space Shuttle (in terms of $/kg of payload). As time went on, SpaceX’s launch costs have continued to decrease as it has completed more launches, upgraded its technology, and began reusing rockets.

Governments have needed help getting payloads, mostly satellites—for communications, for earth observation, for GPS, for national security, and more—into space for decades.

Before SpaceX, the market for launch services—providing the rockets to get those payloads into space—was mostly dominated by United Launch Alliance (ULA), the joint venture between Boeing and Lockheed Martin.

SpaceX found product-market fit with their partially reusable rockets, most notably (at first) the Falcon 9. The emphasis on reusability has had a transformative impact on the economics of space launches. The marginal cost to launch a newly built Falcon 9 stands at around $50 million, while the cost for a reused Falcon 9 drops to just $15 million. This reusability model has allowed SpaceX to amortize the cost of a rocket across multiple launches, dramatically reducing the overall cost per launch.

Today, SpaceX handles about 66% of NASA's launches, at costs approaching 10% of what NASA would have incurred working with ULA.

The first attempts at using constellations of satellites in low Earth orbit to provide low-latency broadband internet came in the 1990s with companies like Celestron and Globalstar—their Achilles heel being high launch costs.

SpaceX has used its partially-reusable rockets and high cadence of rocket launches to revive the idea of internet via satellite constellation. Opened for pre-orders in 2021, Starlink today has over 1.5 million customers, with about 3,600 new customers being added each day. About 3,7000 satellites have been launched so far.

Roughly 25% of all Starlink revenue comes from hardware sales—to use the service, residences and businesses need a physical terminal on-site.

Starlink offers a few different tiers and packages of services:

Starlink Residential: High-speed internet services available at home in rural and semi-rural areas (Starting at ~$110/month).

Starlink Roam: Internet services that are slower than Residential, but are available on-the-go for customers who travel in recreational vehicles. (Starting at ~$150/month).

Starlink Mobility: High-speed internet up to 220 Mbps download, focused on mobile businesses and public sector use cases (Starting at ~$250/month).

Starlink also features packages designed for high-reliability maritime coverage (Starlink Maritime, starting at $250/month) and coming soon, for in-flight internet (Starlink Aviation, starting at $25,000/month).

SpaceX’s key early insight was that it could use launch services (provided both to governments and commercial enterprises) as a revenue-generating engine to finance their larger vision of building increasingly advanced spacecraft capable of cheaper and more frequent trips into space.

The cash flow from bringing countries’ and other companies’ satellites into space—$10-$12 million per launch for the early Falcon 1 launches—saved SpaceX in its early days when it looked like a succession of mission failures might destroy the company. Today, the standard commercial Falcon 9 launch costs roughly $60M, while Falcon Heavy launches cost about $125M each.

For now, SpaceX has the luxury of setting prices based on the next-best alternative versus its own operational costs—a model which allows SpaceX healthy profit margins. In the first quarter of 2023, SpaceX made $55M in profit on its $1.5B in revenue.

In essence, SpaceX’s business model is a flywheel, where launch services provide the funding for R&D of more advanced, reusable spacecraft. These advancements not only bring SpaceX closer to its visionary goals relating to Mars, but make their launches more efficient and cost-effective. As SpaceX launch prices go down, they can get more contracts both from governments and commercial enterprises, creating a continuous revenue stream that further funds research and development.

Vertical integration is the cornerstone of SpaceX’s business model and one of the key things that differentiated them from an early stage. Unlike its primary competitor in launch services United Launch Alliance (ULA), which is a systems integrator and relies on 1,200+ subcontractors, SpaceX manufactures or assembles upwards of 70% of its Falcon 9 rocket components in-house at its Hawthorne production facility.

This high degree of vertical integration allows SpaceX to exercise greater control over the quality and cost of its products It also makes it far cheaper to build.

Where feasible, SpaceX opts for standard commercial components that meet the requirements for low Earth orbit (LEO) missions, avoiding the expensive, specialized components that competitors like ULA frequently use—this approach allowed SpaceX to reduce the cost of an onboard radio from the industry-standard $100,000 to just $5,000.

The coming commodification of launch services means that the real exciting long-term vision of SpaceX hinges on what be done with a cost-efficient, reusable platform in space.

The total size of the space economy has been estimated at roughly $400B to $500B as of 2023, and it’s expected to grow to at least $1T by the year 2030.

SpaceX, knowing that competition will drive down the margins on launch services much as it did in passenger air travel, is already thinking about how it can own a larger slice of that space economy and build more recurring revenue businesses that can generate higher-margin cashflow over the long-term. Starlink is their first play in this direction—but there will be more businesses to come in the future.

By lowering the cost per kilogram to low Earth orbit, SpaceX opens up new possibilities for potentially highly valuable space manufacturing.

Space manufacturing is compelling because certain kinds of materials can only be produced in microgravity conditions—by reducing the cost to launch into space, SpaceX has made it so that raw materials and machinery can be sent to space, with finished goods brought back to Earth, at a cost that makes the whole operation financially viable.

A few examples of the kinds of products that could be lucrative to produce in space include:

Pharmaceuticals: Gravity can cause impurities in certain drugs unless they are produced in vacuums, making their manufacture on Earth expensive. The market for drugs produced in space is projected to hit $10B by 2030.

ZBLAN fiber optic cables: ZBLAN fibers, which are far easier to produce in microgravity, are used in high-precision applications like spectroscopy and laser power due to their higher bandwidth and far superior transmittance. The market for their manufacture is expected to hit $12B by 2025.

Silicon wafers: Silicon wafers for the construction of computer chips are significantly easier to produce in high quality in microgravity, thanks to the way that it prevents defects from forming. The global market for silicon wafers was around $93 billion in 2020 and is expected to surpass $150B by 2025.

Space tourism is gradually becoming a feasible market, and SpaceX could play a significant role in its development. The market currently offers a variety of experiences, ranging from Earth-based activities to suborbital and orbital flights. The cost has typically been the major barrier, with experiences like Virgin Galactic's costing hundreds of thousands of dollars, but SpaceX has the opportunity to bring costs down and make space tourism more commonplace.

SpaceX's reusable technology could be instrumental in reducing costs. Current estimates place the global space tourism market at about $870M in 2022 and project it to grow to almost $4B in 2032 with a CAGR of 16%.

The International Space Station (ISS), governed by a multinational treaty, has been a cornerstone for space activities since its inception. With the ISS nearing the end of its functional lifespan, a vacancy in low Earth orbit (LEO) platforms is imminent. This presents an opportunity for private entities like SpaceX to fill the gap.

In 2021, the U.S. budget for the ISS, including launch costs, was $2.9 billion. NASA has also projected a budget of over $9 billion through 2025 for crewed missions to the ISS. It is clear that the demand for a LEO platform remains substantial.

The cooperating agencies on the ISS currently spend approximately $4.5 billion per year, with half allocated for productive missions and the other half for operations and maintenance. Given the nearing decommissioning of the ISS, this spending could potentially be redirected toward new platforms.

SpaceX, with its experience in orbital technology and a focus on reusability, is well-positioned to provide a solution. The company could capitalize on this opportunity by developing its own LEO platforms, potentially securing a share of the budgets that have historically been directed towards ISS operations.

Market risk: SpaceX's long-term growth as a business hinges not on launch services—the margins on which are gradually going to decrease—but on the delivery of other payloads to space and the building of a 'space platform' for other kinds of applications. The risk here is that this market is almost entirely unproven and hypothetical, with the exception of broadband internet in rural areas via Starlink—and there's no guarantee it will prove to be a huge one.

Capital risks: Aerospace is a massively capital intensive industry, and SpaceX is no stranger to existential risks caused by the capex-heavy nature of building rockets. “The Raptor production crisis is much worse than it seemed a few weeks ago... We face genuine risk of bankruptcy if we cannot achieve a Starship flight rate of at least once every two weeks next year,” CEO Elon Musk wrote in an email to staff last year.