Why Did Firefly Aerospace Stock Drop Friday?

Key Points

• Firefly went public at $45 on Thursday before shooting up past $60 a share.

• On Friday, the stock gave up $10 of yesterday's gains, and closed closer to $50.

• Firefly stock remains a very expensive space IPO.

• 10 stocks we like better than Firefly Aerospace ›

Firefly Aerospace (NASDAQ: FLY), the Nasdaq exchange's newest space stock, went public at $45 on Thursday and quickly surged to close its first abridged day of trading up 34.1% at $60.35.

On Friday, it didn't quite lose all its gains, but it did lose most of them.

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Image source: Getty Images.

Firefly's Freaky Friday

Firefly stock tumbled to close down 16.9% on Friday at $50.17. That's still $5 and change more than the initial public offering (IPO) price, but a lot of Thursday's IPO gains got vaporized as sentiment turned against the stock -- or perhaps it's more accurate to say, against space stocks in general.

Thursday, you see, also saw weak earnings reports out of other spacefarers, including BlackSky Technology and Redwire Corp., both of which continued to fall in Friday trading.

Even Rocket Lab, one of the most popular space stocks lately, received little love from investors after reporting mixed earnings (sales ahead of forecasts, but profits below) Friday, and its stock closed up only 1.1%.

Is Firefly Aerospace stock a buy?

The good news for investors who missed out on Firefly's IPO is that today, at $50 and change, Firefly stock already sells much closer to its original price, giving would-be IPO buyers a second bite at the apple. The bad news, as I described in my pre-IPO note on the company, is that Firefly stock was already looking pretty pricey at the $45 IPO price.

Valued at an "astronomical" 27 times, I thought Firefly stock probably cost too much on IPO day already. At $50-plus a share today, its valuation is pushing 30 times sales. Even with a phenomenal sales growth rate, that's probably more than the stock is worth.

My advice: Even if you're tempted to buy Firefly now, wait for a better price.

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Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.