SpaceX Could Weather a Recession. But Its Stock Might Not. Here's Why.

Recessions affect many businesses, but SpaceX possesses several advantages that could help it weather such economic downturns. Its Starlink satellite broadband service generates consistent revenue, and the company's operations are expanding rapidly. Moreover, SpaceX has significant financial resources.

In the third quarter, SpaceX's revenue increased by 161% year-over-year to $14.6 billion, and net income amounted to $4.4 billion. However, investors should not assume that a resilient business is a risk-free stock. Even if SpaceX's business continues to grow during an economic downturn, its stock price could still plummet.

Starlink, one of SpaceX's key assets, provides internet connectivity to various customers, including households, businesses, and government agencies. Unlike luxury goods, Starlink's service is essential for work, education, and communication. Even during a recession, customers still need internet access. Additionally, Starlink's subscription model brings in recurring revenue, providing financial stability.

However, investors should be aware that Starlink's average monthly revenue per subscriber decreased from $83 to $69 during the same period. This decline can be attributed to international expansion and the introduction of lower-priced plans. While offering cheaper plans may attract more customers and expand into new markets, it indicates that subscriber growth alone is not enough to guarantee long-term success. Investors must consider how much revenue and profit each customer generates.

Spacex is investing heavily in next-generation rockets, satellite infrastructure, and AI computing capacity. These substantial investments could yield immense value over time; however, it will take considerable time before their full benefits are realized. The AI business, in particular, generated $7.6 billion in revenue and reported $431 million in operating income in the third quarter.

Yet, SpaceX spent $19.6 billion on capital expenditures, including $16.4 billion on AI infrastructure, which was more than its quarterly connectivity revenue.

With $90 billion in cash, cash equivalents, and marketable securities, SpaceX has a substantial financial cushion. However, this figure has decreased from $100 billion a quarter ago, reflecting the company's aggressive capital spending. The key distinction investors must remember is that a company's business performance and stock price performance can differ.

During economic turbulence, investors may be less willing to pay high prices in anticipation of future growth and may demand clearer evidence that expensive projects will generate attractive returns. Consequently, SpaceX could continue adding Starlink subscribers and expanding its AI business while investors simultaneously lose confidence in the returns on their investments, causing the stock price to decline.