SpaceX (NASDAQ:SPCX) analysts are initiating coverage on the stock nearly a month after the highly anticipated IPO. Freedom Capital Markets Chief Market Strategist Jay Woods shares with Benzinga why SpaceX valuation scares him, but he’s not willing to bet against CEO Elon Musk.

SpaceX Short-Term vs. Long-Term

Woods told readers of his weekly newsletter and anyone who asked for advice on the SpaceX IPO, including his father, to make their allocations smaller than they would have liked.

"I think the valuation and the pre-market valuations, they scare me," Woods told Benzinga. "I think there are going to be a lot of people looking to cash out and that’s why I didn’t want it to go into the (S&P 500) index."  

Woods said early inclusion in the S&P 500 may have forced buying and made the stock even more volatile at IPO, with people cashing out profits early.

The market expert is far from a SpaceX bear, telling Benzinga he believes the company is "here to stay."

"It’s going to be the biggest grower over time."

Woods said Starlink alone could be a trillion-dollar business.

"If you believe in Elon Musk, you don’t bet against him."

Woods is cautious on the stock keeping its valuation high in the short term after the IPO, telling Benzinga past successful large-cap IPOs have shown that investors get better opportunities to buy into the stock later on.

"I think any long-term investor, you want to buy the stock, put it away, don’t look at it."

Woods highlights Aug. 11 and quarterly earnings for SpaceX as a test, along with several lock-up periods.

"I don’t think this is something we have to rush into. I think there’ll be better opportunities."

Woods said SpaceX likely needs a couple of quarters of financial results as a public company before investors can get too optimistic and get away from the hype brought about by the company’s S1 filing.

"They’ll come back to Earth at some point. Yes, puns intended."

Woods said the $135 IPO pricing range could even get tested and give investors another chance to buy at that level.

"This stock will eventually double from where it is. But I don’t know the time frame as to when that will happen and I think there are better opportunities right now for a trader than to be in space."

SpaceX Index Inclusion

Ahead of SpaceX’s IPO, Woods was vocal about long-standing indexes like the S&P 500 not changing their rules to speed up inclusion or change the requirements for a company to become a member.

"I think you know we have standards for a reason," Woods tells Benzinga. "I understand the market cap really calls into question that maybe there should be a special category. But, let them have this as a goal and guide."

Woods said that SpaceX doesn’t meet the profitability or float requirements that other companies had to meet to be included in the S&P 500.

"When you’re floating such a small amount of share, you’re not utilizing an inclusion into an index to help expand your float. And that to me was just wrong on that grounds."

The market expert recalled Tesla Inc (NASDAQ:TSLA) going down the same road, needing to hit profitability to be included in the S&P 500.

Woods said he doesn’t like the Nasdaq changing its rules, with SpaceX set to join the Nasdaq 100, tracked by the Invesco QQQ Trust (NASDAQ:QQQ) on July 7.

"The Nasdaq 100 is a very iconic place to be in," he added.

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