Investors love Elon Musk's vision and his companies.
He's regularly hailed as our generation's Thomas Edison.
Tesla is up nearly 80 percent year to date and by more than 1,000 percent in the past 5 years. It's more valuable than GM or Ford even though they sell a fraction of the cars. As the only public company in his empire (now that it's acquired SolarCity), Tesla gets the vast majority of attention.
Yet Elon's SpaceX could be the most valuable of any Musk company, and it should get far more attention than it does.
Interestingly, the logic behind the enormous potential for SpaceX would make any traditional value investor comfortable compared to the typical go-go growth investor following Tesla's shares.
Because SpaceX is still private, many investors think of it as part of Elon's wild-eyed dream of shepherding people to Mars or an effort to offer worldwide wifi via low-flying satellites.
Although those are both possible down the road, the key for SpaceX's attractiveness as a business is that it is building the technology that will allow for reusable launch rockets associated with each new satellite launch, along with smaller and cheaper satellites.
SpaceX's "old space" counterparts continue to blow up their rockets for each launch — the single greatest part of the cost associated with each launch. It used to cost up to $300 million to build and launch a satellite.
SpaceX has already recently successfully demonstrated its ability to reuse its Falcon 9 rocket by landing it on a drone barge earlier this year. (The company also successfully launched two rockets this past weekend.) Now the key will be making this technology commercial and dramatically lowering the cost of launching satellites.
Here is the math with SpaceX nailing this market:
Last year, there were 86 civil satellite launches around the world.
In the Western world, the civil market for satellite launches is about a $2 billion to $2.5 billion market. The governmental national security market for satellites represents another $3 billion market.
As of a couple of years ago, the average cost per launch for SpaceX was $61 million. SpaceX — even at that price — was considered a low-cost supplier in the space industry.
The shift happening in the space industry now is similar to the shift from mainframe computers to data centers. That means lower costs, faster speeds and more commodity parts.
In a few years, with SpaceX's reusable rocket technology, it's possible that the cost per launch could drop through the floor to $5 million to $7 million. At that vastly lowered price, it's likely you will see a dramatic increase of the number of satellites launched per year in the next decade compared to the past decade. For redundancy purposes, you will be able to launch multiple satellites instead of just one.
Will the market grow to 10x the current size if the price per launch decreases 10x? We don't know, but this doesn't seem unrealistic.
As of late 2015 SpaceX has contracts worth $7 billion for launches over multiple years into the future. Could it also capture a significant portion of a $6 billion a year market today (if prices drop 10x and volumes go up 10x)?
Taking $5 billion a year in revenues and applying a Facebook-like 15x price-to-sales multiple to it gives you a potential $75 billion market cap for SpaceX — bigger than Tesla today.
And that's just for the rocket-launch business that's confined to the Falcon 9 rocket. SpaceX also is developing the Falcon Heavy for heavy payloads. That could support new markets such as large-scale manufacturing in space instead of on earth polluting our environment. The Falcon Heavy will also be necessary if you're colonizing the moon or Mars. What about mining operations in space of space materials? How much in market cap is the Falcon Heavy worth to SpaceX?
There will be competition, of course. However, SpaceX has been working intensively in this area for 15 years. When "old space" competitors realized just how far behind they were compared with SpaceX in 2014, they set about establishing joint ventures and initiated their own efforts to catch up. It's hard to make up 15 years in 2. Jeff Bezos has established upstarts such as Blue Origin and there are other venture-backed startups but they also have to move quickly.
With such a significant head start, SpaceX might yet become the jewel in the Elon Musk empire.
Commentary by Eric Jackson. To follow his monthly Tech & Media Email, go here. And to hear his podcasts on these topics, go here. You can follow Eric on Twitter @ericjackson . For more insight from CNBC contributors, follow @CNBCopinion on Twitter.
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