1) SpaceX (SPCX), which I've long called the most overvalued large-cap stock of all time, reported earnings yesterday after the close...
And even the greatest stock promoter of all time, CEO Elon Musk, couldn't keep the shares from tumbling as much as 13% early this morning.
Year over year, revenue grew 92% – from roughly $4.1 billion to $7.8 billion. Meanwhile, losses from operations narrowed from about $970 million to $143 million. And "Segment Adjusted EBITDA" (earnings before interest, taxes, depreciation, and amortization) grew from around $1.2 billion to $3.5 billion.
SpaceX also said that cash provided by operating activities rose from roughly $351 million to $3.5 billion. However, the company only reported "Selected Cash Flow Information" for the first six months of this year versus that period last year – which is totally unacceptable for one of the most valuable companies on the planet.
Take a look at this breakdown from Page 10 of the earnings release:
So why did the stock take such a hit?
In part, it's because of a massive increase in capital expenditures ("capex") – largely in the company's AI division (which includes chatbot Grok and social media platform X).
Take a look at the breakdown here on Page 3 of the release:
With capex at more than 8 times operating cash flow (roughly $28.5 billion versus $3.5 billion), SpaceX's free cash flow ("FCF") was a horrific negative $25 billion in the first six months of the year.
This is consistent with what I wrote in my June 5 e-mail – that SpaceX has two great businesses and one terrible one:
... the company's gem is Starlink. It more than doubled its subscriber count from the first quarter of 2025 and is highly profitable...
Though it lost money in the first quarter, the space-launch business is also unparalleled. It accounts for more than 50% of all worldwide orbital launches and more than 80% of all mass sent into orbit.
But a totally unrelated segment, xAI, is dragging down these two great businesses. It's burning huge amounts of cash in an attempt to keep up with its much larger competitors – not just [Alphabet's (GOOGL)] Google but also Meta Platforms (META), Amazon (AMZN), and Microsoft (MSFT), among others.
Another major factor weighing on the stock is that the "float" – the number of SpaceX shares that are eligible to trade – nearly tripled. SpaceX sold 555.6 million shares in its June 12 IPO at $135 – raising about $75 billion while valuing the company at roughly $1.77 trillion.
Under the IPO prospectus, up to 911.5 million shares – about 20% of the early-release eligible pool held by employees and most pre-IPO investors – become transferable just after the first earnings report.
At SpaceX's price early this morning, that's around $100 billion of stock.
I have to imagine that many holders will be eager to sell to diversify – especially in light of the stock's absurd valuation.
And that's the main problem with SpaceX's stock...
With a tiny float of 4% to 5% since the June 12 IPO and a huge $500 million payoff to the Wall Street banks – whose analysts of course debased themselves pumping it (as I covered in my July 9 e-mail) – the stock was manipulated to the moon.
What might it actually be worth?
The company just reported around $7.8 billion in quarterly revenue. Annualized, that comes out to roughly $31.4 billion.
But on the conference call, Musk said SpaceX will reach a $100 billion annual revenue run rate ("ARR") by the end of the year thanks to AI compute deals.
This is as ridiculous as his claim a year ago that, by the end of 2025, Tesla (TSLA) would be serving half of the American population with fully autonomous robotaxis (the actual number at year end was roughly 15 robotaxis in one city – Austin, Texas).
Being extremely generous, I'll give SpaceX a $50 billion ARR by year-end and an equally generous multiple of 10 times revenue. That's $500 billion.
With the stock price decline early this morning, that put the market cap at around $1.5 trillion. So that would mean the stock would be overvalued by at least 3 times – by roughly $1 trillion.
I continue to believe that SpaceX is the most overvalued large-cap stock ever – and that it will dramatically underperform the "Discarded Dozen" I named in my June 12 and June 15 e-mails.
Here's how my prediction has done since then, based on prices early this morning:
2) Meanwhile, three of my "Filthy Five" stocks to avoid have recently reported earnings... and a fourth, AppLovin (APP), reports after the close this afternoon.
I covered Tesla's earnings in my July 24 e-mail (and shared my analyst's bull case on July 27). So let's take a quick look at the other two...
On Monday, Palantir Technologies (PLTR) reported blowout earnings (see the earnings release, CEO letter, and presentation). And the stock soared more than 29% yesterday.
Revenue grew 93% year over year and 19% sequentially – led by 149% year-over-year growth in U.S. commercial revenue. Net income jumped 224%, and cash flow from operations rose 126%.
Guidance for the second half of the year was also strong...
The company raised guidance for revenue to $8.2 billion, adjusted income from operations to $4.9 billion, and adjusted FCF to a range of $4.5 billion to $4.7 billion.
That's all very impressive.
But, like SpaceX, the problem is valuation...
With a market cap around $390 billion, that means the stock is trading at 47.6 and 84.8 times this year's expected revenues and adjusted FCF, respectively.
To me, that makes it the second-most-overvalued large-cap stock of all time.
3) Last week, auto seller Carvana (CVNA) reported second-quarter earnings (earnings release and letter to shareholders)...
Revenue of about $7.4 billion was up 52% year over year and beat expectations of roughly $6.9 billion. And earnings per share of $0.42 were up 62% – a penny above expectations.
But adjusted EBITDA guidance for the full year was $2.7 billion to $3 billion – the midpoint of which was below estimates of $3 billion. The stock fell about 7% right after the earnings release but has since rallied a bit.
For insight, I turned to the friend I quoted in my May 7 e-mail – who manages a financials-focused hedge fund and who's short CVNA. Here's what he told me:
Instead of CVNA growing at an increasing rate with improving profitability, this earnings release shows [the company] growing at a slowing rate with stalling profitability. In particular, [CVNA's] adjusted EBITDA guidance implies a range of $630 [million]-$780 million in the third and fourth quarters, likely well below the $769 million the company reported in the second quarter.
That might be fine if you're trading at 10x earnings, but at 45x 2026 estimates and 35x 2027 estimates it's difficult to justify. We think estimates are going to come down.
Further, we remain very skeptical about the company's reporting and related party transactions, and continue to be concerned about the subprime credit exposure. Clearly, we are not the only skeptics given the short interest is 11% of the float.
I fully agree with my friend. So Carvana remains firmly on my "Filthy Five" list of stocks to avoid... along with Palantir, Tesla, AppLovin, and Signet Jewelers (SIG).
Best regards,
Whitney
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