Space Exploration Technologies (NASDAQ: SPCX) and Tesla (NASDAQ: TSLA) are two Elon Musk-led companies. As of now, SpaceX leads with a market cap of around $1.95 trillion, while Tesla sits at $1.5 trillion. These two are both incredible businesses, but there are more than a fair share of investors who believe they’re incredibly overvalued. On the flip side, there have even been discussions of these two merging.
Determining which company will be bigger by the end of next year is a moot point if they decide to merge. However, if they don’t, which one has a better chance of being larger by the end of next year?
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SpaceX has a higher starting point
SpaceX’s size advantage may be all it needs to win. Its IPO was largely successful, and even though the stock has seen highs and lows since then, it is now back around the $150 per share mark at which it went public. This shows that the market has pretty much accepted SpaceX’s valuation for the time being.
Meanwhile, Tesla has had a rough few years. It’s down 17% this year alone and down 24% from its all-time high. It’s still chasing the high it set in late 2024, which has some investors frustrated that it can’t break through that ceiling.
While Tesla’s revenue has continued to soar over this time frame, its profits have declined.
TSLA Revenue (TTM) data by YCharts.
That has made Tesla’s stock less desirable to own, as its profits are in the tank right now.
However, SpaceX has no profits to speak of. It’s still in a high-growth phase and increased its revenue by 92% in the second quarter. That growth level doesn’t require a company to be profitable, as clearly there’s enough business to be captured to be worth forsaking profits in favor of growth.
I don’t see that changing at any time over the next year, so investors must ask themselves whether they want Tesla’s modest profitability or SpaceX’s rapid growth.
I think SpaceX has more upside, as the company estimates it can achieve a 45% profit margin once fully mature. That is a lot higher than Tesla will ever get, and that’s based purely on the types of products these two businesses offer.
With SpaceX growing faster and with higher profit potential, I think it will be the larger stock by the end of next year.
