The SpaceX IPO Looks Expensive on the Surface. Here's What Investors Should Know.

Investors should understand what that valuation is betting on.

Reports suggest SpaceX is targeting a valuation of $1.77 trillion. That's on the higher side of earlier reports, which speculated that the company would target a valuation somewhere between $1.5 trillion and $2 trillion.

Many experts are sounding the alarm about this lofty valuation, especially considering SpaceX remains unprofitable to this day. A recent report from Morningstar , for example, values the company at around $780 billion. Yet according to a recently disclosed prospectus, SpaceX believes it is chasing a total addressable market of $28.5 trillion.

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For a historical perspective, it's very reasonable to think that SpaceX's targeted $1.77 trillion valuation is scarily overpriced. That's because most of the company's potential has yet to be realized. Pricing the stock, therefore, becomes mostly a practice of what the company can become, not what it is today.

What exactly might the company become? If you decide to participate in the SpaceX IPO , there's one major opportunity that most of your money will be betting on.

SpaceX's only profitable business right now is its Starlink service , which offers broadband satellite internet and mobile connectivity services. Last year, this division brought in roughly $11.4 billion in revenue, earning $4.4 billion in operating profit.

The company's rocket business , meanwhile, is perhaps the most advanced in the world. If SpaceX can successfully commercialize its Starship megarocket, payload costs could drop dramatically, giving the company a strong leading position globally in both cost and capacity.