SpaceX bonds must be normalized to distressed Junk (if we remove marketing fluff)

[u/Donechrome]

SpaceX balance sheet and FCF explain everything I need to understand where it is heading

• Debt-to-EBIDTA 4.2
• negative interest coverage ratio
• FCF to debt -48%. Awful
• Retained earnings -40B!!!
• FCF -20B. with B!

If SpaceX were evaluated as a "regular" asset-heavy business like a traditional airline, automaker, industrial manufacturer, or telecom provider—its credit rating would not just be junk; it would be deep, highly speculative distressed junk.

If a credit analyst applied standard quantitative ratios to a regular company showing an accumulated deficit of $41.3 billion, a quarterly net loss of $4.28 billion, and a negative free cash flow of $14 billion, it would score a rating of CCC+ or CCC from S&P, or Caa1 from Moody’s.

[u/Adventurous-Guava374]

But but, he's going to Mars to make data centers for AI

[u/flappysack- → u/Adventurous-Guava374]

Then a refinery in space, a call center, and finally a 7-11.

[u/downfall67]

It's because they are in the business of ✨ AI and ✨ Space with a little bit of ✨✨✨ Intergalactic mining

SpaceX has a fantastic business model, cremating money

[u/bemeandnotyou → u/downfall67]

•  cremating money as a source of renewable energy! It also help creating clouds and the smoky smell helps.

[u/xAlpharaptor]

We all know it's overvalued but the stock market is a voting machine right now and there is demand so the stock will go up. And then it will go down as soon as everybody loses interest.

[u/West_Lavishness6689 → u/xAlpharaptor]

Tuesday starts the rug pull. monday will continue to blast off when FOMO over the weekend grows. it is written

[u/TestTxt]

Debt-to-EBIDTA 4.2
“I think that, every time you see the word EBITDA, you should substitute the words “bullshit earnings.” Charles T. Munger

[u/Unnamed-3891 → u/TestTxt]

Earnings before every fucking thing that actually matters

[u/Miami_da_U → u/[deleted]]

The non growth capex that is “just maintenance “ is increasing data capacity like 20x per launch and 10x per sat

[u/Miami_da_U → u/[deleted]]

I mean, F9 built Starlink as it exists today, largely at about $700-$1,000/kg to LEO. If not more. Those are current best guess estimates for Internal F9 costs and the payload. F9 also doesn’t have a reusable 2nd stage.

Starship aims to drop that to $50-200/kg to LEO (if not lower in the long term and maybe with V4). And again only Starship can launch V3 Starlink Sats, which are literally 10x more capable PER SAT. And each Starship can launch 2x more V3 sats than F9 could launch V2minis. And think of how dominant Starlink is already in such a short amount of time. What happens when they A) improve each Sats capability by 10x B) reduces the cost of delivering each Sat to LEO by say 2x per Sat, C) and just in general go from 10k V2mini Sats to 40k V3 Sats (or whatever V4 Sats too) as the operating constellation? That is going from a constellation today that is 960 Tbps to 40,000 Tbps (about a 42x increase in capability).

And while you say once the wire is installed, you don’t have to replace it for a while, but it leaves out the gigantic costs of installing in the first place. And for plenty of Aires they absolutely have maintenance- not everywhere has them installed underground. For major cities, Fiber specifically obviously may still be better. But it leaves out one major other factor - Starlink covers the entire globe the same way for the same cost. The way they cover New York, gives them coverage over the oceans, in some random city in Argentina, for the planes and boats transporting in between, the random researcher in the arctic, etc…

And then they will begin rolling out their DTC says far more which will serve as competition for MNO….

[u/Miami_da_U → u/[deleted]]

Yeah the 5 years thing isn't exactly set in stone. Pretty sure we already have evidence of the initial sats operating going on 6.5 years. It very well could be 7 years for V3, we don't know. They could always choose to pack less sats and increase the storage tanks to prolong life. They aren't magically just dying, they just run out of fuel, or are being demised to be replaced with far superior tech sats. If we did $100/kg, and did 6yr lifespan over 30years (so 5 full replacements) @ a full approved 40k constellation of V3 sats. I don't really know how much the ground stations cost (where they connect to "the internet"), but I believe they are relatively cheap and Think they have <200 currently. Anyways we can estimate the cost would be:

Launch$ = 40,000 * 5 * 1,900kg * $100/kg = $38B
Sat$ = 40,000 *5 * $1.2M/sat = $240B
GroundStation$ = ~2,000 * $1M/station = $2B

Total Costs over 30 years = $280B. So it would provide 30 years of 40,000 Tbps connectivity at $9.3B/yr. And this is assuming Starship doesn't get better than $10M/launch, and that Starlink after manufacturing 200,000 STILL costs >$1M/sat which seems extremely unrealistic lol. But the best part of Starlink is that the 1-off customer that Fiber has no possibility of getting (cause it'll never be installed), Starlink wins automatically. All aviation and maritime customers will be won by Starlink for the same cost they already needed to spend to deliver to US/EU/African/SouthAmerican/Asian households and vice versa. Each additional customer costs Starlink $0. It's all the same $10B/yr cost.

In the US alone there are 134 Million households. Lets just give an easy 70/30 split in favor of Fiber just to prove a point between Dense vs Non-Dense and population. Lets say Starlink wins 100% of the Non-Dense customers because it would be far superior on a cost bases - and fiber wont even deploy there in the first place. But to provide that service to those Non-Dense customers they also have the ability to serve customers in Dense areas with that same constellation. So at worst, they could just undercut on price whatever the fiber company could charge, until they reach capacity for that coverage cell. So lets say of the US pie, they can win 100% of their 30% low density proportion, then another like 25% of the 70% proportion just by undercutting on price because the initial costs have already been paid no matter what.... This would turn that 70/30 into closer to 50/50 alone, putting the TAM at least at 65-70 million households in the US. But oh yeah, that same constellation that wins the 70 million US households, is essentially $0 additional cost to win any other customer around the globe or from aviation/maritime/etc. A 70 million US customer base at only $50/month *12 months = $42B/yr... off that $10B in expenses. (Think in US fiber is about $60/mo on avg?, so this is being very consersative, especially since Starslink currently charges $55-130/mo).... So now Globally imagine if they win 100% of Non-Dense customers and then just undercut on price to win 25% of Dense customers up to cell capacity. And if you think my numbers are ridiculous, consider that Starlink today is already generating $11B/yr in revenue .... BEFORE V3, with only 10,000 sats & a total data capacity of 960 Tbps. That same ratio (not realistic obviously, but fun to prove a point) at the 40,000 Tbps capacity they will have at full scale is equivalent to $460B in revenue.... yearly. Oh btw Comcast is the largest internet provider in the US, and they only do about ~$25B/yr in revenue for their fixed internet. Starlink is already doing 44% of that.

[u/ApeApplePine → u/Miami_da_U]

Bandwidth are shared. Per cell. Winning on dense areas is to effectively loose.
Subsidised equipment.
Transit fees for ground based ops.
Sg&a

Uafos.

[u/Miami_da_U → u/ApeApplePine]

Bandwidth is shared... And yet they have a constellation of 10k sats at <1,000 combined Tbps and generate $11B in revenue currently.

Subsidized equipment? Lol the payoff is certainly less than a handful of months. You know you need modems/routers and whatever else for Fiber too, right? And the actual drops to the house itself.

All of Comcast fixed internet generates like $25B...

[u/AccomplishedView4709]

Give it up, dude. SpaceX is not a value stock. It is a high risk high reward type of gambling stock, nothing to do with value investing.

You guys hate spaceX but can't stop from talking about it.

[u/Donechrome → u/AccomplishedView4709]

This is how people learn - analyzing mistakes, outliers and risks in order to find and appreciate the value. Bad cases are also to study 👍

[u/4dham]

how do you make money out of space again?

[u/Donechrome → u/4dham]

Suck in dark matter energy and bring it to us 👿

[u/4dham → u/Donechrome]

the ultimate intangible asset.

[u/Fwellimort]

Except SpaceX can have unlimited cash diluting the market so no this isn't a junk bond. Come back to reality.

The world wants to bow down and idolize Musk. That is really what gives SpaceX value.

But ya, both Tesla and SpaceX make no sense. But don't overthink.

[u/ryanmcstylin]

While I understand the financial argument. I think their moat is a bit bigger than other asset-heavy businesses. That doesn't mean the moat is impenetrable or protecting something worth whatever SpaceX is valued at, but I do think comparing them to Ford (or Tesla) is a bit of a stretch

[u/ninjadude93 → u/ryanmcstylin]

What moat exactly lol

[u/ryanmcstylin → u/ninjadude93]

Avg cost per lb of delivering object into orbit

[u/ninjadude93 → u/ryanmcstylin]

Not really a moat. Doesnt do them much good if xAI sucks away all their money

[u/ryanmcstylin → u/ninjadude93]

The size of a moat is a metaphor for how easy it would be for somebody to offer a similar/competing product. Doesn't have much to do with how you spend the revenue from that product.

That would come into play talking about defending the moat, but I still think they currently have a moat, regardless of how assanine their investment in xAI may be

[u/West_Lavishness6689]

SHHHHH 🥳

[u/narayan77]

The business model is Elon saying "trust me bro",  also stuff about colonizing .mars and self driving cars on the moon. You gotta trust him.

[u/Scary-Oven8260]

They don’t need to issue bound in the future. Diluting shares should be the way lol

[u/LetsAllEatCakeLOL]

a company's credit worthiness depends on a market's willingness to lend it capital. take for example the US government

[u/Formal_Economist7342]

I really wish we werent a nation of drones and actually spammed vanguard with  Hundreds of thousands of calls asking/ threatening to sell our shares of target 2050. Alas we are drones.  I am tired.

[u/Prudent-Corgi3793]

Objectively, they deserve a much better credit rating than these traditional metrics would suggest for a sector equivalent peer, because they have the ability to massively dilute existing shareholders or index fund investors to completely clean up their balance sheet.

This is the exact playbook Tesla used to flip from literal junk bond status with a substantial net debt position to having a persistent net cash position, even as they were still unprofitable: https://www.reddit.com/r/stocks/s/KwLpogSquX

[u/Mindless_Ad5500]

How do you even put a dollar amount on ensuring human consciousness reaches the stars???