The foundations of a SpaceX $100 billion valuation

With SpaceX reportedly having crossed $100 billion in valuation, people may be wondering “why." Is SpaceX part of a bubble? Will it ever have an IPO? Can it even show a profit? It can be easy to think that there’s something wrong here. SpaceX is a privately held corporation that closely guards its financials. Nevertheless, there are three key revenue streams that can be pointed to to justify that valuation: one in the short term, one in the medium term, and one in the (very) long term. SpaceX’s most immediate revenue stream is its Falcon 9 space launches. Thanks to its reusable boosters, the number of SpaceX launches in a year has been growing at a staggering rate. During its early years in 2010-2013 SpaceX would only launch a few times a year. But once they started heavily reusing boosters, the launch numbers rose dramatically, reaching 23 so far this year. By the end of this year they might reach 33. A majority of those launches were of reused Falcon-9s, as reuse stopped being a novelty and became a fact of the business. SpaceX Business is good. While revenue per launch has dropped somewhat, it has stabilized at an average of $80 million per launch, leading to yearly launch revenue of around $1.2 billion per year. SpaceX has been able to profit not just from traditional government work — which now includes NASA astronauts — but from the explosion of SmallSats and NanoSats in low Earth orbit (LEO), including the growing numbers of LEO constellations. SpaceX is very open about the limits of the launch business, though, which is expected to cap out at about $7-8 billion dollars a year. In the medium term, their solution for revenue generation is likely to come from Starlink. Starlink is SpaceX’s LEO-based Internet service constellation that is already providing internet service to beta customers in the US, Canada and a few other countries. Once fully operational, it will provide high-speed and low-latency satellite-based Internet service to the entire globe. It will allow people in remote areas — whether in developing or developed countries — to enjoy internet access comparable to urban Fibre-to-the-Home customers. Considering their previous options were either glacially slow telephone-based service, expensive cellular-based service, or high-latency geosynchronous satellite-based service, this is a huge untapped market. Current estimates are that nearly 70 million people could be Starlink customers worldwide, and that it could be bringing in $30 billion a year in revenue. That potential revenue has fueled speculation — supported by some statements by SpaceX executives — that SpaceX will be spinning off Starlink into a separate company and take that company public. SpaceX has stated that they have no plan to go public until they reach Mars, though. It's a reminder of their long-term goal: interplanetary travel. SpaceX founder Elon Musk has made no secret that SpaceX exists to take humanity to Mars, and the swift development of the SpaceX “Starship” launch vehicle demonstrates their dedication. Starship’s reusability and stainless steel body shows that SpaceX plans to make Starships as quickly and cheaply as possible, then turn them into interplanetary workhorses ferrying people and cargo between Earth, the Moon, Mars, and points beyond. Granted, this is likely still at least a decade away. But one can just look at Amazon, owned by Musk’s space rival, Jeff Bezos, to see the possibilities. Two decades ago, Amazon was an online bookseller. A decade ago, the company was notoriously unprofitable. Yet, now, Amazon is slated to turn Bezos into the world’s first trillionaire. Anybody who bought into Amazon early will have seen incredible gains. In that light, SpaceX’s valuation stands as a bit of a gamble. We don’t know what 2030 or 2040 could look like. Certainly nobody predicted 2020. Still, there are reasons to be confident in SpaceX’s future, chief among them being the votes of confidence by the U.S. Government. The Falcon 9 become a workhorse for official American launches, but NASA’s decision to use Starship to support the Artemis mission to get humanity back to the Moon — instead of the lander proposal by the “National Team'' aerospace titans Lockheed-Martin and Northrup Grumman — demonstrates that NASA believes that SpaceX can deliver on their promises. If they believe, why not investors? It shows that investing in SpaceX’s long-term future may be a gamble, but it’s an informed gamble. And until the day comes when Starships are carrying people to Mars, investors seem to have decided that the risk will be mitigated by SpaceX’s now-profitable launch business and the likely-to-be-profitable Internet business.