Revisiting SpaceX’s $36-Billion Valuation After Its First Manned Mission – Trefis

[Updated 6/1/2020] SpaceX Valuation Post Crew Launch Still Relies Primarily On Starlink Global Internet Network

Last weekend, SpaceX successfully launched two NASA astronauts to the International Space Station using its reusable Falcon 9 rocket the first instance of a commercial manned launch. As the privately-held company makes significant progress with its launch program, we briefly revisit the key drivers of its valuation, which now reportedly stands at about $36 billion. [] See our dashboard analysis detailingSpaceXs Revenues and Valuation for the underlying numbers on launches, revenues per launch, and valuation multiples.

SpaceX is likely to launch about 15 commercial missions this year. Assuming an average revenue of $80 million per launch (Falcon 9 launches start at about $60 million & Falcon Heavy missions cost as much as $150 million) this amounts to about $1.2 billion in launch revenues for 2020. This implies that the companys latest reported valuation of about $36 billion values it about 30x projected revenues. This is steep, considering the limited potential of SpaceXs launch business. After all, the total commercial launch market is expected to stand at $7 billion by 2024 []. Investors are likely betting big on the space-based global internet network Starlink which we project could be valued at over $30 billion by 2025. See our detailed dashboard analysis Starlink Valuation: What Could SpaceXs Starlink Service Be Worth?

[5/30/2018] Whats Driving SpaceXs Sky High Valuation?

SpaceX stands out among the list of multi-billion dollar startups as one of the few companies that has grown by focusing on an industry that has existed for decades, rather than disrupting existing industries through the use of technology. While SpaceXs ultimate goal of colonizing Mars will take decades to reach, if at all, the company has definitely achieved a series of significant milestones since it was founded in 2002.

Over recent years, though, SpaceX has done well todominate the space launch services sector offering to launch commercial (and occasionally military) satellites at a much lower price than incumbents while largely remaining profitable. This has shaken up the industry status quo and forced incumbents likeArianespace and United Launch Alliance (ULA) to work on similar low-cost launch systems. As we capture inour interactive dashboard for SpaceX, space launch services have been the only source of revenue for the company and it looks poised to cross $2 billion this year if all goes well.

Notably, though, SpaceXs valuation has outpaced revenue growth over the years, and could top $32 billion next year according to our estimates. In this article, which is the first of our in-depth series on SpaceXs existing and potential growth drivers, we detail the reasons behind SpaceXs rocketing valuation.

SpaceXs Business Model Is Evolving, And Holds Immense Potential

SpaceX is a space technology company primarily focused on manufacturing and launching rockets and spaceships. Since it was founded in 2002, the company has built a series of rocket and spaceship systems from scratch, with the core driving principle being to reduce costs substantially by making various parts of the system reusable. The company has demonstrated success in reusing and relaunching many rocket components a first for any private or government operator and has made its long-term goal of building fully reusable rocket systems that can be used to reach other planets a very real possibility in the not too distant future.

While SpaceX has made significant advances in space technology, it currently makes money purely by launching satellites into low earth orbit and by transporting cargo to and from the International Space Station. Notably, the company charges customers much less per launch compared to other players. Although this has resulted in profit margins being small compared to incumbents, it allows SpaceX to line up more launches giving it more opportunity to refine and advance its expertise in reusing components. In other words, the space launch services keep cash flows positive as SpaceX focuses on the R&D aspects of its long-term goal of interplanetary travel.

Admittedly, it is difficult to develop a timeline for when (and if) SpaceX succeeds in its mission to put a human on Mars and also if it will be able to do so profitably. However, the fact that the companys valuation growth continues to outpace revenue growth can be explained by the fact thatit intends to add more revenue sources over the coming years. This includes billions in potential revenues annually from:

A Quick Look At What Currently Drives SpaceXs Valuation

As we detail inour interactive dashboard for SpaceX, revenues for the company currently depend on just two revenue drivers: the number of successful launches in a year, and the average revenue per launch.

Number of Successful Launches in a year:This is the total number of successful launches SpaceX carries out in a year. The numberof successful launches climbed from 6 in 2014 to 18 in 2017. Weexpect the number of successful launches to increase to 31 in 2018 and further to 45 in 2019.

Average Revenue per Launch:SpaceX has a fixed price for launching commercial satellites, and offers a sizable discount for customers opting to reuse rocket components. Also, the company had millions of dollars in one-time payments linked to its long-term contracts with some customers like NASA and Iridium, which boosted payments over the initial years. This would explain the reduction in average revenue per launch from an estimated $175 million in 2014 to around $72 million in 2017. We expect the figure to decline to $65 million in 2018 and further to $60 million in 2019, as more small-sized customers opt for the low-cost benefit offered by reused rocked systems.

As shown above, our forecast for SpaceXs launches and average revenue per launch in 2018 and 2019 results in revenue forecasts of $2 billion and $2.7 billion respectively.

To arrive at the revenue multiples used by early investors to value SpaceX over the years, we plotted our estimates for revenues with SpaceXs valuation.We interpolated the yearly valuation for the company from funding-round valuation figures of $12 billion in 2014 and $21 billion in 2017.

As shown above, this works out to an increase in the revenue multiple for the company from 11.4 to 16.2 an increase of more than 42% even though the companys revenues were largely stagnant over this period. As SpaceXs space launch service works on extremely low profit margins, and has limited scope for growth in the long run, we believe that the increase was primarily due to the potential value proposition from Starlink.However, given the sharp increase we forecast in SpaceXs launch revenues, we estimate a current revenue multiple of 13 for 2018, and 12 for 2019, as detailed in the chart above. This works out to acurrent valuation of $26 billion for the company potentially increasing to over $32 billion in 2019.

That said,we believe that our multiple of 12 for 2019 is conservative, given the immense growth potential for Starlink and point-to-point Earth travel in the long run. What remains to be seen is how soon and how profitably SpaceX is able to implement these ambitious initiatives.You can see how changes in any of these drivers can impact SpaceXs valuation bymaking your own changes on our dashboard.

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Revisiting SpaceX's $36-Billion Valuation After Its First Manned Mission - Trefis