Space is a new and promising sector with both present and future possibilities. According to an estimate by Morgan Stanley, the space business might increase from $400 billion to over $1 trillion by 2040, excluding new markets such as space tourism. How do investors profit from this opportunity? Several companies are beginning to establish a presence in this new sector.
Investors must recognize that such a nascent business entails numerous dangers, yet these thirteen companies can provide substantial returns if they have a favorable long-term outlook.
Morgan Stanley predicts that the space business will earn more than $1 trillion by 2040, from its current valuation of approximately $350 billion. Space technology is utilized daily, and non-space organizations might even use these advancements for their services and goods. In reality, the United Nations Office for Outer Space Affairs (UNOOSA) views the space economy as essential for socio-economic development. As such, it is advocating improved global cooperation.
Typically, pure-play space enterprises concentrate on a single industry or area and generate over fifty percent of their revenue from space-related services. Generally speaking, space corporations may engage in any of the following:
We are launching, servicing and operating space and satellite communications platforms.
We are creating new technologies, such as artificial intelligence (A.I.), robotics, and 3D printing.
Beneficiating from aeronautical operations in their industry, such as advancements in GPS, the internet, and aircraft.
Offering services for space tourism to the general population.
Space tourism is becoming increasingly popular, with businesses like Richard Branson's Virgin Galactic and Elon Musk's SpaceX announcing trips as early as 2022. Jeff Bezos, the creator of Amazon, created his own space tourism company, Blue Origin, in 2000; the first public space mission is scheduled for July 2021. If three of the world's most successful entrepreneurs invest in space exploration, then this business may be one to watch.
1. Astra Space Inc. (ticker: ASTR)
Space exploration has always encountered obstacles, yet humankind's efforts to reach the stars continue to advance. In February, issues with an Astra rocket led to the loss of four satellites supported by NASA and a sharp decline in the company's stock price. Randy Baron, portfolio manager at Pinnacle Associates, explains, "Astra's recent misfortunes demonstrate how difficult it is to join the club of launch startups vying to provide less expensive means of launching goods into space." Since the failed mission, the organization has investigated and discovered the issues. Commercially, it has also advanced, announcing a multi-launch contract with a launch services provider and a deal to supply engines to a satellite design and production company. Its shares remain grounded, but that could prove to be a bargain if the company's aim to deliver daily launches by 2025 is realized.
2. Rocket Lab USA (NASDAQ: RKLB)
As the only other firm that frequently conducts rocket launches, this company flies beneath the radar of the majority of investors. Still, it is the second-most profitable space company behind privately owned SpaceX.
Rocket Lab's Electron launch vehicle has staged 23 successful flights and transported 109 satellites into orbit since its maiden orbital launch in January 2018 to deploy customer satellites for Earth photography, weather monitoring, and ship tracking. It has also constructed three launch sites, including one in New Zealand. It was the nation's first privately-owned launch pad, allowing for the launch of a new rocket every 72 hours. Its Wallop Islands, Virginia location is dedicated only to launching rockets for the United States government.
Rocket Lab went public in August of 2017 when it combined with a particular purpose acquisition company (SPAC) and began trading at $11.55 per share on the same day. It rose to almost $21 per ticket in the subsequent weeks, but since then, its trajectory has been slowly downward.
This is partly due to third-quarter statistics in which revenue was cut in half to $5.3 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) losses widened to more than $25 million. This was primarily due to the continuation of launch limitations in the fourth quarter due to COVID-19. Only two rockets were launched in the fourth quarter, but the rate of launches is expected to increase again this year.
In mid-November, Rocket Lab's backlog of business climbed from $141 million the previous year to $237 million. It was awarded a $24 million contract by the Space Force to construct its Neutron upper stage rocket, passed two design assessments for a Mars mission, and purchased two additional space enterprises, Advanced Solutions, and Planetary Systems Corp.
3. Mynaric AG (MYNA)
The business of space involves more than just entrepreneurs vying for the most consumers for their launch services. According to Baron, new business models are emerging inspired by the successful software-as-a-service paradigm in the I.T. sector. Space data as a service, satellites as a service, and ground stations as a service are examples. He argues that all of these offer the benefits of space without the need for one-off satellite production, government regulation, launch integration, or space data transfer. Space as a service will rely on communication via the internet service of the next generation. Mynaric, an expert in laser-based communication networks, is liked by Baron. According to the corporation, "experts in telecommunications regard laser communication technology as a major enabler for the future Internet infrastructure."
4. Virgin Galactic (NYSE: SPCE)
Virgin Galactic is another space firm poised for takeoff, with a similarly depressed valuation to that of Rocket Lab, but one that has failed its investors more regularly.
The market has lost confidence due to launch delays and capital-raising efforts. However, Virgin will soon be ready to implement space tourism. A small market niche makes Virgin an intriguing stock that investors would be advised not to overlook.
Virgin has also successfully launched rockets, though not nearly as frequently as Rocket Lab and frequently with significant delays. However, the business believes it is prepared to commence space tourism beginning in the fourth quarter of this year.
With a seat on one of Virgin's spacecraft costing upwards of $250,000, it will not replace automobiles, trains, and aircraft as the preferred form of transportation for most people. With over 2,700 billionaires and over 60 million millionaires globally, Virgin will not lack potential clients.
Last summer, it was discovered that 600 individuals had reserved seats on a Virgin flight, demonstrating that space tourism is in extremely high demand. Analysts predict that demand for such travel exceeds 120 billion dollars, and Virgin Galactic is the only company that can capitalize on it. By 2023, revenue is projected to reach $1.7 billion.
The price of Virgin's stock share is currently below $9. Still, it is likely to expand by 250 percent over the next year, less than the fourfold gain Cannacord Genuity analyst Austin Moeller had previously predicted. The moment has come for space tourism, and investors may choose to board this potential growth stock.
5. SpaceX
Despite the Russian incursion, SpaceX continues to extend its Starlink satellite internet network in Ukraine. CNBC reports that over 150,000 Ukrainians use the Starlink internet service every day.
The optimism of investors has made SpaceX one of the most valued pre-IPO firms globally. In October of last year, an insider share transaction revealed a stock pricing agreement valued the company at $100 billion, a 33 percent increase from its previous valuation. But Tesla (TSLA) CEO Musk has no current plans to publicize the company.
Nonetheless, an IPO for the SpaceX Starlink satellite business is possible. SpaceX has launched about 2,000 Starlink satellites to provide space-based broadband connections, and it is reported to have a quarter-million individual and business subscribers.
NASA and the Department of Defense routinely send payloads into space aboard Falcon 9 rockets from SpaceX, and Falcon Heavy has launched government and commercial payloads.
The Crew Dragon capsule is routinely used to transport humans to the International Space Station by SpaceX. The most recent Dragon flight, which occurred on April 27 and lasted less than 16 hours, was the quickest. SpaceX is also developing the Starship for deep-space missions and space tourism.
6. Trimble
Trimble (TRMB -0.58 percent), an industrial technology company, may contribute to the advancement of the space sector with its software solutions that enable clients to use data information to run their operations. For instance, it can use satellite data to assist customers in maximizing the utilization of their physical assets. Its core operations focus on buildings and infrastructure, geospatial data, commodities and utilities, and transportation.
For example, the company's technology assists farmers in maximizing crop yield. Trimble's ability to simplify portions of these complex industries and applications could make it a perfect fit as the space sector expands. Trimble could be a strong company for broad exposure due to the immaturity of space, and it is the largest holding in ARK's space-focused ARK Space Travel & Technology ETF.
7. BlackSky Technology
As technology progresses, we can communicate information between space and Earth faster via satellites. BlackSky Technology (BKSY -9.24 percent) is a geospatial-data firm constructing a network of satellites to conduct quick surveillance of the planet's terrain via its software-as-a-service platform. Users include U.S. intelligence agencies and business customers in the commodity and insurance industries.
It is a fledgling company competing in the market against other satellite providers. Nonetheless, BlackSky's $2.5 billion transaction pipeline will provide the company with dependable revenue in the following years. Investors will want to monitor execution to ensure that backlogged business translates to invoiced revenue and that BlackSky's satellite network is successfully expanded over time. Its market capitalization is only $370 million, so the upside is substantial if things go well.
8. Boeing
One of the earliest space companies, Boeing, helped construct the rocket that sent Apollo 11 men to the moon in 1969. Now, New Orleans is building the Space Launch System rocket.
The SLS is the world's most powerful rocket, capable of transporting astronauts and spacecraft into deep space. Delays and cost overruns have plagued the NASA rocket.
Additionally, Boeing created the Starliner spacecraft to transport astronauts between the ISS and Earth. During the test flight in December 2019, the capsule was unable to enter the proper orbit, and it has also been subject to delays. NASA also contracts Boeing to construct satellites and run the International Space Station.
United Launch Alliance, or ULA, is a Boeing and Lockheed Martin joint venture that supplies space launch vehicles to NASA, Amazon, and others.
9. Lockheed Martin Corp. (LMT)
Turning to larger businesses, Kalkine Group CEO Kunal Sawhney mentions this principal defense contractor. "Markets are fickle, so savvy investors may prefer to gamble on businesses that are least affected by supply chain interruptions," he says. In addition to having a comparatively more stable and diversified revenue stream due to their market dominance, large-cap firms typically have the flexibility to manage such short-term issues. Lockheed recorded nearly $15 billion in revenue for its most recent quarter, with more than $2.5 billion coming from its space division. "It remains a somewhat superior investment in space stocks, not the dividend income," Sawhney says. Keep in mind that the company's broad revenue source means that even if the space section performs exceptionally well, other divisions may suffer if, for instance, the Pentagon's budget is cut.
10. Procure Space ETF Trust II (UFO)
If you want exposure to the space industry but don't want to do the research required to select specific equities, a space-themed exchange-traded fund may be right. "Investing in a single space firm at a time is incredibly speculative, and the likelihood of losing money is quite substantial," says Michelle Connell, owner, and president of Portia Capital Management. She suggests investing in a basket of companies, indicating UFO. With no company in its top 10 holdings comprising more than 6% of the ETF's total weight, "the odds are extremely high that some of these companies will supply their services and generate profits for their investors," she says.
11. ARK Space Exploration & Innovation Exchange-Traded Fund (ARKX)
This ETF focuses on companies "leading, facilitating, or benefiting from technologically enabled products and services that occur beyond the surface of the Earth," according to the fund's website. This comprises orbital and suborbital aerospace enterprises and those whose operations stand to gain from the aerospace activity. According to ARK Investment Management, in the next five to ten years, satellite broadband sales might surpass $10 billion per year in the United States and $40 billion internationally. The fund's top holdings include Iridium, while others are more grounded, such as Japanese construction, mining, and forestry equipment giant Komatsu Ltd. (KMTUY).
12. Aerojet Rocketdyne
Aerojet Rocketdyne is an American manufacturer of rocket and missile propulsion systems. While more than half of the company's revenue comes from missile defense systems, its space sector is positioned for growth because of contracts with Boeing's SLS rocket, Northrop's OmegA rocket, and the United Launch Alliance's Vulcan rocket.
13. Shift4 Payments
How will we process the back-and-forth payments if there is a space industry? The payment processing provider Shift4 Payments could provide a solution, and shift4's platform is utilized by hotels, entertainment businesses, and restaurants around the nation.
According to Morgan Stanley's analysis, satellite broadband and satellite-delivered internet might contribute between 50 and 70 percent to the predicted expansion of the space industry. SpaceX has invested substantially in the development of Starlink, its forthcoming internet service, and shift4 has teamed with SpaceX to provide payment processing services. The management of Shift4 thinks that the global addressable market is worth between $100 billion and $500 billion. Shift4's satellite broadband exposure and expanding payments sector could fuel expansion in the coming years.
Investing in Space Stocks
Before investing in any space equities, it is crucial to understand how the companies generate revenue. For the vast majority of businesses, this is quite simple. For instance, Starbucks creates revenue by selling coffee. And these are the leading coffee stocks. However, while most people consume coffee daily, hardly anybody launches a rocket daily.
Important to remember is that there are several ways for space enterprises to generate revenue:
Charges for launching objects into space.
Construction of rockets, satellites, etc., for NASA or the Department of Defense.
When satellite services are in the air, they incur fees.
Most space enterprises that come to mind generate revenue by manufacturing rocket components and selling them to NASA. In 2020, NASA's budget was estimated to be roughly $22.7 billion.
Example of Space Stock Trading
As an illustration, suppose you desired to spread a bet on the price of our Virgin Galactic shares.
If you believe that the share's value will rise over the long term, you might start a long position by opening an order ticket at the current buy price of £55. Enter your wager size, then set risk-management controls before initiating a trade. If you are correct and the cost of Virgin's stock increases, you will earn a profit equal to the price rise multiplied by the value of your wager. Therefore, if you wagered £10 per point and the price moved by 50 points over some time, your profit would be £500.
Similarly, if the market were to move in the opposite direction, you would incur a loss for every point that the price has reduced multiplied by the value of your wager. Profits and losses are computed in the same manner. If you believe that the share's value will decline shortly, you might employ a stock shorting method and start a sell position.
As spread betting is a tax-efficient trading method, no capital gains tax, stamp duty costs, or commissions will be due. However, if you were to trade CFDs with us, you would be subject to capital gains tax and commission fees. These are calculated on your order ticket when placing a transaction on our platform, so you don't need to figure them out. You should ensure that your account has adequate funds to meet any additional trading expenses.
Conclusion
The popularity of space stocks is increasing due to new technologies, exploration programs, and potentially future tourism missions. Consider the most significant space stocks we've discussed if you're interested in space stocks.
Real-time News
