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Space Exploration Technologies (NASDAQ:SPCX), better known as SpaceX, has been trending lower in recent weeks. It fell below the IPO price of $135 and is currently at $116, close to the all-time low of $107.
Given the broader concern in the market right now, I decided to ask my chatbot friend ChatGPT if there was a serious chance that the stock trades below $90 at some point before the end of the year.
An optimistic starting view
It assigned a 35% chance that it trades below $90 before year-end, which is lower than I was expecting. From the current level, this would mark a further 22.5% decline.
ChatGPT argued that although risks are real, it believes the business has powerful supports that should prevent a high-quality company like SpaceX from suffering another 20%+ decline in just a few months.
For example, it pointed to several potential positive catalysts before year-end. These include additional government launch contracts, stronger-than-expected Starlink subscriber growth, or encouraging commentary around AI infrastructure that could all shift sentiment quickly.
Even though I understand where it's coming from, I'd assign a higher probability of 60%-70%.
Why I'm cautious
I believe the biggest worry is the looming expiration of IPO lock-ups. I'm talking about the point in time where early investors are able to sell their stock.
The first major release is expected in early August, with additional tranches becoming eligible for sale through the autumn. From what I've read, as much as 40% of the company is potentially tradable by December.
Of course, I'm not saying everyone will sell their stock as soon as they can, but it's logical to think some will. That could create pressure on the growth stock to fall if it happens.
Another element is the trend lower. The stock is down 31% in the past month alone. So another 22.5% drop before year-end really isn't that much of a big deal. If SpaceX stock was rallying hard, I'd assign a lower probability. But right now I don't see much to stop the fall, so I feel it's more realistic than not.
Mulling over where to buy
Don't get me wrong, I do like SpaceX as a business. Starlink in particular has a huge amount of potential in the years to come. So the question for me is where represents a good price to buy. After mulling it over, it's less about a specific price level. Rather, I want to wait until volatility has died down, lockup periods have expired, and the share price trades with a more level head.
In reality, it'll probably be closer to December before these conditions are met. Yet, in waiting until then, I think I avoid buying at either an inflated price or a price that is then going to experience very choppy and volatile swings.
