The SpaceX S-1: The Good, The Bad, The Verdict
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What are the key highlights of SpaceX's S-1 IPO filing?
It's SpaceX's S1 day on Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime contributors Matt Frankel and Jon Quest. And guys, we picked one heck of a day to record here because I'm looking across the news. Walmart's down 7% on tepid guidance. Other consumer retailers are way down. Quantum computing companies are up like 20% on a deal with the government for equity deals and things like that. Nvidia had their earnings, but we're not even going to talk about any of those things today because you know what? Earnings, they come and go. But an S1 as big as SpaceX only comes around once in a while. So we're going to do a deep dive into SpaceX's S1 today, and we're going to do the whole show on it.
We're going to start with... What we liked about it in the first section, you know, we'll call it the good. In the second part, we're going to kind of poke some holes into some of the things that we didn't like. And based on what we were talking about for the show, there's a few things that we're not big fans of. And then at the end, we're going to give our verdicts on whether or not we're going to be buying this IPO, whether we may be waiting or if any of us are just like, no, thank you. Obviously, the job today was before we went on, it's just basically comb through the S1, see what you see, see what you like. John, I think we all kind of came to the consensus. There's plenty of things to like and not like.
But what stood out to you most is like, hey, this is good. I like really like this.
There are multiple parts to SpaceX's business, but the best looking one to me was Starlink. Starlink is both profitable and it's growing like crazy. So check this out. This is the satellite business that allows internet connectivity around the world. Even in remote places, that's kind of the appeal of it. But in the first quarter, its subscriber count more than doubled. It now has more than 10 million subscribers to Starlink. Now, average revenue per user did drop in the first quarter and it fell pretty significantly. That would ordinarily be kind of troubling to me. But, you know, it's added these lower price points, it's expanded into international markets where the monetization isn't as high. The net result has been this robust subscriber growth, and that is really important.
More than that, it's also been able to grow that revenue profitably, even at the lower monetization rates. So subscribers more than doubled, as I said. Revenue up 32% year over year. That's a really good growth rate. And then it delivered a segment operating margin. I'm just talking Starlink. We're backing out the other parts of the business. The Starlink operating margin was 36%. Now, if this was a standalone business, you would look at that. You'd see subscribers more than doubling, revenue up more than 30%, operating margin approaching 40%. That would be a business that I'd be very interested in owning because that is great growth, great profitability, and fantastic adoption pointing to long-term trajectory.
I would love that.
I'm going to jump in with an anecdote here because the guys may not know. I lived in like Africa for like six years and I did. I signed up for to be a Starlink customer in like 2019. And I think like six months ago is when I actually got the email says, hey, we're now available where you're living. Of course, I've moved since then. I was like, well, not as much helpful today. But I feel like when I got that email like six months ago, I think my haunches should have been up like, man, if they're emailing me about this, this must mean there's like an IPO or something is coming because they want to grow.
Yeah, and John's right that Starlink is the shining star of this business, at least so far. It's actually the fastest growing telecom company of its size in history. Starlink has 75% of all active maneuverable satellites on Earth. It's a big competitive advantage, $4.4 billion in operating income last year. It's a legit business.
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