1) Today's headlines are all about the SpaceX IPO...
The company, listed as Space Exploration Technologies, began trading on the Nasdaq Composite Index around noon under the ticker SPCX.
The stock opened at $150 – 11% higher than its $135 offering price. And it's trading around $170 at the time of writing, giving the company a $2.2 trillion market cap. That makes it the seventh most valuable company in the world.
As I detailed last Friday, SpaceX consists of three businesses, two of which are great – satellite Internet constellation Starlink and space launches. But the remaining business, xAI/X/Grok, is incinerating cash at an alarming, accelerating pace in a futile effort to keep up in the AI race.
In total, SpaceX only grew revenues 15% last quarter, down from 33% in 2025. And losses ballooned to $4.3 billion. Over the trailing 12 months ("TTM"), its total revenues came in at $19.3 billion.
So, in terms of valuation, the company is worth around 10 times TTM revenues – which I still think is extremely generous.
But at the offering price of $135, equal to a $1.77 trillion market cap, the stock would be trading at 92 times TTM revenues – making it nine times overvalued.
If the stock pops, say, 35% above that, it would be trading at 124 times TTM revenues – making it more than 12 times overvalued.
This chart courtesy of Charlie Bilello shows the extraordinary rise in SpaceX's valuation over time:
For more on the bear case on SpaceX, this insightful post on the Motorhead Substack points out the "financial engineering" that went into this IPO:
Beware of the options market on a purposefully executed "low-float, high-valuation" IPO, meant to create both a passive flow squeeze, and a huge gamma squeeze after SpaceX's options market opens on day 4 or 5 after the IPO.
This X post notes what happened to other similar, overhyped IPOs:
Lastly, this series of different quotes by investing legend Warren Buffett (hat tip to my friend Doug Kass for finding them) warns against investing in any IPO:
An IPO is like a negotiated transaction – the seller chooses when to come public – and it's unlikely to be a time that's favorable to you.
People win lotteries every day... You don't want to get into a stupid game just because it's available.
The idea that a newly issued security [IPO] – brought to market at a time of the seller's choosing and surrounded by massive hype – is the single best bargain among thousands of global businesses is absolute nonsense.
When an offering carries a ridiculous 7% commission just to incentivize salespeople, it simply cannot be the most attractive investment available.
While people easily get caught up in the excitement of a new launch, look at the reality: You have thousands of existing public companies whose prices are set by a natural auction market, free from aggressive promotion or hidden fees.
It makes no sense to buy a security precisely when an insider decides the timing is perfect to sell. Frankly, it isn't worth spending five seconds thinking about IPOs.
In summary, I'm reminded of this saying: "You don't have to attend every argument you're invited to."
In fact, the SpaceX and OpenAI IPOs are competing to eclipse AI data-analytics firm Palantir Technologies (PLTR) as the most overhyped, overvalued large-cap stock of all time.
I've just recorded an emergency briefing with one of my most trusted analysts, Gabe Marshank, explaining why these IPOs are a looming disaster... not just for the people who invest in them directly, but also for millions of investors who have no intention of buying the stocks.
This is a critical warning I want heard by as many people as possible. We'll be releasing our presentation next Tuesday, June 16 at 1 p.m. Eastern time. To ensure you don't miss it, click here to reserve your spot.
2) Seemingly unlimited capital is being thrown at SpaceX and the AI bubble, where no valuation is too high. Meanwhile, it's being sucked out of beaten-down companies and sectors, where no valuation is too low...
So today, I'm creating my "Out-of-Favor 10" list, starting with the six companies I mentioned in yesterday's e-mail – Global Payments (GPN), PayPal (PYPL), Intuit (INTU), Campbell's (CPB), Clorox (CLX), and Lululemon Athletica (LULU).
I'll add four companies to the list to make it an even 10. First is spirits maker Diageo (DEO), which I wrote about on April 20 and 21. And I'll include three more software companies that, like Intuit, have been hammered by fears of the "SaaSpocolypse":
- ServiceNow (NOW), which I wrote about on April 27, 28, and 29. (It's an open recommendation in our flagship Stansberry's Investment Advisory newsletter – subscribers can read our full write-up here. If you'd like to subscribe, click here.)
- Adobe (ADBE), which I'll cover today...
3) Adobe reported strong earnings after the close yesterday – a classic "beat and raise."
Revenues were $6.62 billion, up a healthy 12.7% year over year ("YOY") and above expectations of $6.46 billion.
Adjusted earnings per share ("EPS") were $5.96 YOY, beating expectations of $5.82.
Free cash flow was $2.2 billion, roughly flat YOY, and the company used all of it to buy back stock. That resulted in 6.3% fewer diluted shares outstanding compared with a year ago.
Management also guided for higher-than-expected revenues and EPS for the next quarter and for the full year.
Adobe's results aren't an outlier. As the chart in this X post shows, annual recurring revenue ("ARR") is soaring across the Software as a Service ("SaaS") sector:
Adobe's stock has been obliterated since the beginning of 2024, losing roughly two-thirds of its value. So you might expect it to be rallying hard today. But that's not the case...
Analysts were falling all over themselves to downgrade the stock this morning. It tumbled as much as 10%.
This was for a few reasons: Chief Financial Officer Dan Durn's departure – hardly surprising after the longtime CEO's departure last quarter... a delay in planned Creative Cloud price increases... and a $480 million guidance reduction for organic ARR this year due to a strategic shift toward prioritizing "freemium" user growth.
But with the stock now around $200, it's trading at a mere 8.2 times this year's updated guidance for adjusted earnings of $24.40. This is by far the lowest multiple it has ever traded at.
Yes, the company's growth might be slow... But the stock is being priced as if it's a rapidly melting ice cube, and there's no evidence of this. Adobe is an insanely great company, and the sell-off here is hugely overdone.
Summarizing everything above, I'm going to stick my neck out and make the following prediction: From today's closing prices, my Out-of-Favor 10 will far outperform SpaceX over the next year.
In a future issue, I'll share the table I've created for this list and will update it periodically. Stay tuned!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.