The Rolls-Royce (LSE: RR) share price has investors transfixed. So does Space Exploration Technonologies Corporation, or SpaceX (NASDAQ: SPCX). But for very different reasons.
Rolls-Royce shares have gone bananas, up a jaw-dropping 1,276% in the last five years. That breakneck growth has slowed lately and investors are wary as the shares get expensive. The group’s trailing price-to-earnings ratio is now a mighty 51.8, way above the average FTSE 100 P/E of around 16.
Despite that, the FTSE 100 engineering giant is still gunning along, up 25% in the last three months, helped by a strong set of half-year results on 30 July.
Can this FTSE 100 stock keep flying?
Revenues beat expectations once again, up 26% to £11.3bn, as its Civil Aerospace, Defence, and Power Systems divisions all power on. The board raised full-year guidance again too. History suggests chief executive Tufan Erginbilgiç will beat that. He’s under pressure, though, because at today’s valuation even the slightest slip will be punished.
The SpaceX trajectory has been somewhat bumpier. That was always likely after the hype and excitement surrounding its IPO on 12 June. The shares instantly rocketed from their starting price of $135, only to crash 50%. On Friday (7 August), they jumped 15% to close at at $133, roughly back where they started.
The stock got a lift from Q2 results, as revenues jumped 92% year on year to $7.8bn, while last year’s $1bn group quarterly loss narrowed to just $541m.
The group’s Starlink connectivity business is profitable, but all eyes are on its AI segment. Revenues tripled to $2.56bn, but infrastructure investment flew to $15.8bn.
Both growth stocks are subject to wider pressures too, such as what happens in the Iran war, the interest rate outlook, and whether AI is a bubble. So, which looks more tempting today?
Is the S&P 500 stock better value?
I hold Rolls-Royce and although I’m not selling, I won’t buy more at today’s valuation. SpaceX, by contrast, is starting to look tempting again. The shares will take time to find their true valuation, and there are concerns over what pre-IPO investors will do when their lock-ins expire. But I think it’s worth considering for brave investors who still have room for another slice of tech in their portfolio. So do the brokers agree?
The 16 analysts offering one-year share price forecasts for Rolls-Royce produce a consensus target of 1,701p for August 2027. If correct, the shares would climb 10% higher from here. That confirms my view that the shares are finally starting to top out. But these are only predictions, remember.
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