SPACEX investors are finally getting some reprieve after months of being whipsawed by volatility as the Elon Musk-led company’s stock breaks above the level that it has been stuck below since July.

Shares of SpaceX have traded above US$160 – a level they closed at on Jul 6 but had not returned to since – all week. The stock has jumped 48 per cent in just three months after hitting a low on Aug 5.

The counter continued to rise on Friday (Oct 9) after SpaceX acquired a crucial batch of spectrum that will allow it to offer “complete phone coverage in America”.

It is a stark reversal from the extremely volatile trading investors endured following SpaceX’s blockbuster initial public offering in June.

The shares hit the market at US$135, soared above US$200 in their first few days of trading and then plunged to US$108 by late July, erasing US$1.2 trillion in market value.

The rebound since August has added back more than US$750 billion in value.

“This is a long play and there’s a little bit of aura and hidden-ness, you know, ‘Elon Musk-ness’ in it, and I think that’s what it’s trading on,” said Bloomberg Intelligence analyst George Ferguson. “There’s a bunch of believers in this thing.”

The stock had been trading in a tight range since mid-August, as lock-ups banning early investors from selling their shares expired, boosting the total float, or shares available to trade, to about 33 per cent of the company’s outstanding shares from roughly 7.5 per cent in the IPO.

Wall Street was concerned that the expirations would trigger a wave of selling, but the steadiness in the stock price indicates that insiders are not unloading their stakes.

“A lot of the SpaceX insiders want to hang on,” said Nancy Tengler, chief investment officer at Laffer Tengler, who holds SpaceX shares. “They aren’t necessarily selling into the lock-up (expiration). This company has enormous potential.”

In addition, the stock likely got some buying support from the rebalancing of the Nasdaq 100 in September, which gave SpaceX a larger weight in the index due to its increased float, meaning funds that track the gauge would have to buy more shares.

Bob Gruendyke, portfolio manager at Allspring Global Investments, said: “Supply comes on, but also index weights go up as the supply goes on.” Allspring has sold the SpaceX shares it held in the IPO.

All of this set up the shares for a breakout that started at the end of September, just as the company’s massive Starship rocket reached orbit for the first time, a key milestone.

The post-IPO sell-off helped to make SpaceX one of the cheapest ways to play the space and intelligence economy, according to Morgan Stanley analyst Adam Jonas, who has a “buy”-equivalent rating on shares.

The stock is priced at 111 times earnings expected over the next 12 months, down from more than 540 times in July. The shares look even less expensive when adjusted for year-on-year growth, Jonas said in a note to clients on Monday.

“We expect developments over the next few months will help investors better appreciate the role of (SpaceX) in addressing the critical bottlenecks of power and chip making, potentially unlocking earnings growth and multiple expansion for the stock,” he added.

Of course, there are risks to an investment in a company like SpaceX. For example, it is looking to raise US$40 billion in debt so it can buy chips from Nvidia.

That would be one of the biggest debt deals for the artificial intelligence build-out, and it comes as long-dated Treasury yields are around the highest levels in decades.

The news sent the shares down 6.6 per cent over the Wednesday and Thursday sessions, and pushed the price of five-year credit default swaps on SpaceX’s debt to a fresh high.

And the stock could face more pressure ahead. An upcoming lock-up expiration will see 7 per cent of the company’s shares becoming available to trade.

Then, in November, SpaceX is scheduled to release its second quarterly earnings report as a public company, alongside another major lock-up expiration.

Many investors are therefore trying to ignore the near-term gyrations and focus on the stock’s long-term potential.

“SpaceX is just a leap of faith,” said Larry Tentarelli, founder of Blue Chip Daily. “You’ve got to buy it and hold it for two, three, four years, and don’t look at the volatility. Because fundamentally, there’s no reason to buy SpaceX right now.” BLOOMBERG