According to sources quoted by Bloomberg on Monday (November 6th local time), SpaceX's rocket launch and starlink businesses are expected to generate revenue of approximately $9 billion this year, with sales expected to increase to around $15 billion in 2024.
According to the report, as the product is launched in more regions around the world, it is expected that the sales of the Star Chain business will exceed the launch business next year, accounting for the majority of SpaceX's total revenue.
SpaceX is a space exploration technology company under Musk, mainly engaged in orbital rocket launches, manned spaceflight, and satellite internet services. The satellite internet service, also known as the satellite chain business, aims to provide high-speed internet connectivity to users worldwide through satellite networks. In addition, SpaceX has also carried out some other businesses, such as solar panel projects, to generate more revenue.
Star chain is no longer the 'abyss of negative cash flow'
Musk has always attempted to use the Star Chain business unit as an important source of revenue to fund SpaceX's capital intensive projects, such as the next generation spacecraft and starships.
But for a long time, the Star Chain business has been seen as SpaceX's "abyss of negative cash flow".
On the one hand, the capital expenditure of this business is enormous. Since 2019, Starchain has launched over 5000 satellites into low Earth orbit, with over 4700 satellites currently in orbit, making the company the world's largest satellite operator. It is reported that SpaceX plans to put 42000 satellites into orbit by 2027.
On the other hand, its revenue and user numbers did not perform as expected. According to a previous report by the Wall Street Journal, the revenue of the Star Chain business surged sixfold year-on-year to $1.4 billion in 2022. Although the revenue for the year was much higher than the $222 million in 2021, it was significantly lower than initial expectations. According to the documents raised by SpaceX to investors in 2015, it is estimated that the Star Chain business will generate nearly $12 billion in revenue and $7 billion in operating profit in 2022; In terms of user count, as of the end of 2022, Starchain had over 1 million active subscribers, while SpaceX had previously predicted a high of 20 million.
However, entering 2023, the business is quietly undergoing a turnaround.
A landmark event was that on November 2nd local time, SpaceX CEO Musk posted on the X platform that SpaceX's star chain business had achieved cash flow balance.
Is profitability just a matter of time?
Cash flow balance means that this company may no longer require large-scale financing cash flow, and the value of the enterprise is gradually highlighting. What may it bring in the future?
Truss has already given an example. In 2018, although Tesla had not yet turned a corner, it achieved cash flow balance for the first time and significantly corrected its net operating cash flow. In the third quarter of 2018, Tesla generated $1.4 billion in cash flow from operating activities, bringing its free cash flow to $881 million, becoming an important turning point for the electric vehicle manufacturer, which burns billions of dollars every quarter. Tesla's free cash flow in the second quarter was - $740 million. According to the annual report, Tesla's operating cash flow for 2018 was $2.098 billion.
In contrast, Tesla had negative operating cash flow and significant capital expenditures before 2018.
Afterwards, with the continued growth of Model 3 production and sales, Tesla ultimately emerged from various negative vortices of poor financial condition, layoffs, heavy penalties from US regulatory authorities, and frequent short selling by institutions, and "successfully overcame the crisis".
There is more than one good news about Star Chain besides balancing cash flow.
Previously, in September, Jonathan Hofeller, SpaceX's Vice President for Star Chain Business and Commercial Sales, attended the World Satellite Business Week conference in Paris, during which he revealed that Star Chain terminals were no longer sold at a loss and that the number of Star Chain users had "far exceeded" 1.5 million (as of May 2023, SpaceX reported having approximately 1.5 million Star Chain users).
With the further enhancement of scale effect, it seems only a matter of time before the star chain business can achieve profitability. Gwynne Shotwell, the President and Chief Operating Officer of SpaceX, provided a timeline as early as early February and expects the Star Chain business to start profitable in 2023.
It is worth noting that as early as 2021, Musk stated that once cash flows became more predictable, SpaceX would spin off and drive the Star Chain to go public. The company's executives have also stated that Star Chain may one day go public.
But the timing of its IPO is still uncertain. Last year, Musk told employees that the company may not go public until 2025 or later.
The satellite communication industry is facing catalysis, and the domestic industry chain is expected to continue to improve
From an industry perspective, Chen Ningyu of Zhongtai Securities believes that Musk's announcement of the Star Chain cash flow balance event not only provides a successful commercial satellite internet model, but also has the potential to further force other satellite internet companies/projects around the world to accelerate the process of star launch/networking.
Since the beginning of this year, there have been frequent incidents related to satellite internet. On July 9th, China successfully launched a satellite internet technology test satellite into space, and the satellite smoothly entered its predetermined orbit; On August 29th and September 8th, Huawei respectively released Mate60Pro/Pro+, which can support satellite calls, that is, satellite phone work can also be carried out without ground network signals; On October 11th, the official website of SpaceX Star Chain launched a new Star Chain Direct to Cell service.
Zhongtai Securities believes that with the continuous promotion of domestic policies and industry progress, the domestic satellite internet industry chain will continue to improve. At present, special attention should be paid to investment opportunities in areas such as satellite manufacturing and ground terminals.
Recently, the 2023 third quarter report of public funds has been disclosed. According to statistics from Huatai Securities, the proportion of Q3 positions in the communication sector has decreased, and satellite internet has been increased. Guoxin Securities also stated that from the Q3 month on month changes, the allocation of public funds in sectors including satellite internet increased significantly in the third quarter.