☕ Up ~12% this morning alone, I hope you're on board!

Howdy! 👋 

I’ve been involved in global markets for the past 45 years, and if there’s two things that I’ve learned in all that time…  

1. Companies that hesitate become footnotes. The ones that lead become empires. 
2. Invest accordingly. 

Case in point, SpaceX. 

Plenty of people didn’t think Musk could pull it off. I, however, was more convinced than ever that he could coming into this week and, in fact, said as much ahead of Monday’s opening bell. (Watch) 

I wasn’t disappointed, and I trust you weren’t either. 

Shares are ~12% higher as I type. 

I hope that you’re on board – pun absolutely intended considering that we’re talking about a rocket company – for the simple reason that companies like SpaceX come around once in a blue moon and I would hate to see you miss it. 

Long time readers know that I don’t mince words. 

And the One Bar Ahead® Family knows that I mean what I say when it comes to identifying what I consider to be life-changing profit potential early in the game. Examples include Palantir under $10, Nvidia at around $600 before it ran to $1,000 and split and so on. 

If your financial advisor is still blathering on about diversification, you may want to rethink that premise and/or your relationship with that advisor. The markets are reorganizing themselves in ways that don’t recognize or respect Wall Street’s old ways. 

Many folks take issue with that statement – and I get why. 

But here’s the reality. 

The markets are growing more concentrated with each passing day and unless you’re tracking, there’s a very high probability you and your money will get left behind. 

The old saying about taking a horse to water really does ring true… the question is not whether they recognize the watering hole but whether they’re smart enough to drink. 

Click to enlarge.

I told you to watch four things when SpaceX reported. (See #1) 

Team Musk went 4 for 4. 

1 – AI and Starlink growth, plus scaling capacity 

SpaceX’s AI business, which the company now calls “Super Intelligence,” brought in $7.56 billion. That’s up 830% from $813 million a year ago, nearly triple last quarter, and it’s now the company’s biggest segment by a mile. 

New cloud services deals, the Cursor acquisition, and wider adoption of Grok did the heavy lifting. 

Starlink added $5.25 billion, up 69%, and now has 13.6 million consumer subscribers. That’s up from 12 million just three months ago. 

Compute capacity scaled to 1.7 gigawatts. Think of that as the size of the engine room powering all that AI. JPMorgan thinks it hits 10 gigawatts by the end of next year but I think it’s more like 15+. 

Starship’s first orbital flight delivered 26 next-generation Starlink V3 satellites, roughly 10 times what a Falcon 9 Starlink launch can carry. Palantir’s Chad Walquist made the observation that it looks like an “orbital Pez dispenser.” 

I agree. 

Scale begets scale. 

2 – Infrastructure spending: unlocks are a non-issue except to the pontificators and worrywarts 

SpaceX spent $19.6 billion on capex last quarter. Capex is the money spent building things, and here about $84 of every $100 went to AI computing. The company says it’ll spend another $35–40 billion in Q4. 

Gulp??? 🤷🏻‍ 

That’s what the valuation gang and spreadsheet bandits want you to think. 

But hardly. 

SpaceX is sitting on roughly $90 billion in cash and marketable securities. 

Remember, this is the exact same spending that got the stock clobbered after the company’s first report as a public company back in August. The capex number scared the daylights out of people, and the lockup calendar had everybody braced for a flood of insider selling. 

Fast forward three months and that spending is now showing up as revenue and profit. 

As for the unlocks, roughly 1.3 billion more insider shares become eligible for sale right after these results.  

The worrywarts will wring their hands.  

I encourage you not to… just because somebody points out an exit sign in a crowded theater doesn’t mean everybody is going to run for the hills when the movie is about to start. 

Besides, every share that unlocks needs a buyer. Not for nothing, and after a quarter like this one, I suspect there’ll be a line. 

3 – A SpaceX and Tesla merger: I said that was likely years ago and was openly regarded as having lost my mojo 

Unka Elon said point blank that a merger would be “a good idea” with “a lot of merit.” Both companies have now formed special committees of independent directors to explore it, at the request of shareholders. Within minutes, it was the story everyone was talking about. 

To be fair, Musk was careful to say no terms have been agreed and calling it a done deal would be “overstating it.” Any deal goes to shareholders, too. At current valuations, the combined company would be worth something on the order of $3.6 trillion. 

Translation: A merger just went from crazy pants to a very real possibility. 

I mighta been on to something, me thinks. 

Mojo intact. 😉 

4 – The first profitable quarter 

The “Street” expected $0.13 coming into yesterday’s report but SpaceX delivered $0.35. 

~169% more than expected. 

That works out to $4.4 billion in net income on $14.58 billion in revenue, which is up 161% from last year and blew past the roughly $12.7 billion analysts had penciled in. 

A year ago, the company lost $1.1 billion in the same quarter. Last quarter it lost $541 million. This quarter it made $4.4B. So much for the valuation crew who are, funny enough, strangely silent this morning so far. 

Hooyah! 🚀 

5 – What’s next? You ain’t seen nothin’ yet 

Elon dropped this little tidbit during the call. 

SpaceX could exit 2027 with annual recurring revenue (ARR) somewhere between $500 billion and $1 trillion. 

ARR, in case you’re not familiar with the term, is the yearly pace of revenue a company expects to keep coming in, and it’s an important investing yardstick. For perspective, the company’s stated goal is at least $100 billion in ARR by this December.  

Point being… Musk is talking about five to ten times that in just one more year. 

The doubters are, of course, already out in force on this one, too. 

I get it – I really do.  

Skepticism is healthy. Kicking the tires is how you avoid getting taken for a ride, and Musk’s timelines do tend to run hot. But at some point the tires have been kicked, the numbers are on the table, and the question changes from “can he do it?” to “what happens now that he has?” 

If you’ve been on the sidelines doubting, there’s no shame in that. Plenty of smart people were right there with you.  

The only real mistake is refusing to update your thinking when the facts change. 

So what if Musk runs late now and then?  

The fact remains that betting against him is incredibly foolish. Lots of people have tried… and failed, usually at tremendous cost. 

Anybody betting against Musk today may as well have bet against Steve Jobs back in the day. 

That’s not even the best part as far as I’m concerned. 

Stay tuned for a rash of price target upgrades. 

JPMorgan is out this morning with $500, up from $240, more than doubling its previous target and implying better than 200% upside from Tuesday’s close. (Read) Barclays, Wells Fargo, Goldman Sachs, Citi, UBS, and Bernstein all raised their targets, too. 

That’s great and all, but I told you $500 back in June. (Watch) 

Some people will say “smarty pants” and I get that too. I could easily have been wrong, but a) I wasn’t and b) that’s not the point. 

The single most important consideration for any investor when it comes to SpaceX is something my grandfather used to say all the time when I was growing up… you miss 100% of the swings you never take. 

He was a funny guy who always had a quip for everything, and his insights usually made tremendous sense, particularly when he framed them in baseball, something near and dear to his heart. 

Not to get too far off track, but he played in baseball’s golden era in what was euphemistically called the “stovepipe league,” because the teams would huddle around stoves to keep warm before taking to the open-air fields of the time. 

Some of the stories he had to tell… 

Anyhooo… back to SpaceX. 

My take is a little different but similar, if that makes sense. 

You’ve got to be in to win… if you want to win. 

As I told my friend Scott “The Cow Guy” Shellady yesterday, people constantly worry about everything that could go wrong. They rarely stop to ask what could go right. (Watch) 

Not for nothing, but I find myself thinking this morning that $500 a share may be very conservative when the dust settles. 

You know what to do. 😀 

Bottom Line 

Don’t chase yesterday’s trends and wonder why you've missed tomorrow’s inevitabilities. 

Buy the best, ignore the rest!® 

Tesla on deck! 

Hooyah! 💯 

You got this – I promise! 

As always, let’s MAKE it a great day, 

Keith 😊