SpaceX Is Buying Airwaves to Take On the Wireless Carriers. Is the Stock a Buy?

SpaceX announced on October 8 that it will purchase Grain Management's nationwide 800 MHz spectrum for roughly $8 billion. This move aims to enhance SpaceX's Starlink Mobile service, which currently struggles to reach phones indoors. The FCC approved SpaceX's launch of 15,000 Starlink Mobile satellites, but the deal still requires approval.

Meanwhile, wireless carriers like T-Mobile, Verizon, and AT&T saw a 10% drop in stock value following the news. SpaceX's stock, however, has remained relatively stable and even dipped since the acquisition announcement, currently trading near $146. This purchase doesn't directly compare with the $2.9 billion Grain paid for the airwaves, but SpaceX is also acquiring 65 MHz of spectrum from EchoStar for $19.6 billion.

Management believes investing in low-band spectrum is crucial, despite the high cost. Starlink Mobile revenue surpassed $4.3 billion in Q2, up 66% year-over-year from $3.3 billion in Q1. Operating income in this segment grew 79% year-over-year to $1.7 billion. Despite this growth, SpaceX's overall valuation remains high, with a market cap of $2 trillion and a stock price of over 80 times sales. For now, investing in SpaceX might be too expensive for shareholders.