SpaceX crashes 40% from peak, but Elon Musk insists it will be ‘worth more than Earth’; Should you buy, now?

SpaceX has erased almost $1 trillion in stock market value in five weeks, yet Elon Musk continues to say, if goals are met, the company “will be worth more than Earth.” But is it really safe to bet on SpaceX right now?

What happened to the SpaceX stock?

SpaceX's blockbuster IPO was priced at $135 a share on June 11, raising $85.7 billion in the biggest public offering ever. The stock got off to a flying start, closing its first trading day on June 12 at $160.95. The rally continued over the next few sessions, with shares hitting an intraday record of $225.64 on June 16, briefly lifting the company's market value above $2 trillion.

From then on, SpaceX shares started going downhill. In seven consecutive trading sessions through July 20, it lost 21% to end at $119. The stock rebounded on Tuesday, rising as much as 7%, but the gains faded later in the session, with the stock finishing the day at $123.54.

However, retail investors who bought the shares at the $135 IPO price are down about 10% now. Those who bought four days later, at the June 16 peak of $225.64, are down around 40%.

Speaking about the stock movement, Viram Shah, Founder & CEO, Vested Finance, had told LiveMint earlier, “The thing to keep in mind is that SPCX is barely a few weeks old as a listed stock, so what we're watching right now is price discovery happening in real time.”

“The signal here isn't that something's broken. It's when most of the value lies in the future that it's going to swing. If you can't sit through a 20% drawdown without flinching, the position was probably too big to start with.”

But, should one consider buying at 40% discount?

Despite the slump, Wall Street remains largely upbeat on the stock. More than 80% of analysts tracked by Bloomberg rate the company a buy equivalent, and their average price target of about $238 implies roughly 78% upside from current levels.

But as per experts, the stock is still expensive. Even after the recent drop, SpaceX was still valued at 49 times its expected revenue in mid-July. That's much lower than the nearly 140 times revenue investors were willing to pay during the stock's first few days of trading.

Morningstar put SpaceX’s fair value at $780 billion before the IPO even priced. The market is still paying about double this number.

But there's a chance the stock rebounds from here if the company's results impress investors on August 4.