One of the most important earnings reports in recent years is happening tomorrow…
The one company that MILLIONS of traders, investors, and analysts have been watching with bated breath, on the edge of their seats, topping headlines far and wide…
This is one of the biggest catalysts of the year.
If you haven’t guessed yet, I’m talking about Space Exploration Technologies Corp. (NASDAQ: SPCX) earnings.
And my strategy is NOT what you think…
Why I’m Not Trading SPCX Earnings
There are three reasons:
- It’s the first earnings report this company has ever filed.
- There’s no earlier quarter to hold it up against. Nobody knows whether they’ll report Starlink and the rocket business as separate lines or lump everything into one revenue number.
- The report also comes out after the market closes.
No one knows what will happen between the close tomorrow and the open Wednesday. Whatever the report does to the price, it does it while you sit there and watch.
One more date, and this one is already locked in. The prospectus makes this earnings release the starting gun for the first day insiders are allowed to sell, two trading days later.
So insiders can sell about 911 million shares on Thursday.
How many of them actually sell? Nobody knows. But you need to know that about 4-5% of the company, that couldn’t be sold before, can after Tuesday.
On the headline numbers: Wall Street is predicting an EPS loss of about 25 cents, $7 billion in revenue.
But nobody is buying this stock for its current earnings (and one report won’t change that).
The chart is beaten-down. SPCX is trading below the price it sold at in June, and roughly half off the high it hit that same month.
On top of that, about 30% of the available shares have been sold short. Bears will want to see their bets pay off, while bulls will be looking for any positive news to trigger a squeeze.
But either way, if it gaps against your position overnight, your stop-loss never gets a chance to work.
Now, just because I’m not trading this report doesn’t mean I’m not listening…
This is still the biggest IPO of the year, and its first earnings report could have market-wide ripple effects.
The 4 Earnings Numbers To Watch
- Starlink
It’s the only part of the business that charges customers every month. Last quarter it brought in a little under $1.2 billion.
- Rockets
The rocket side is uneven. SpaceX only books that money when a launch actually happens, so a flight that slips a few weeks pushes the revenue into the next quarter.
So I’ll look at how many rockets they got off the ground, and whether that pace puts them where they need to be by December.
- Government Contracts
I’ll also look at how much work they have booked with the government. NASA and the Space Force don’t cancel contracts because the stock market had a bad month.
- Free Cash Flow
Then the cash. Losing that much in three months burns through a lot of it, and I want to know how long the rest of it lasts.
And if the company gives any forward guidance, pay close attention.
But really, I’m watching and listening, then looking to trade the reaction in the second half of the week.
There are better setups to trade until then.
Stay sharp,
Jack Kellogg
*Past performance does not indicate future results
