Space Could Be a $1 Trillion-Dollar Business. Here Are the Stocks to Play It.
SpaceX's Starship isn't the only space-related blowup recently. Space stocks, too, have crashed, and while most are never coming back, a couple might be worth buying out of the wreckage.
It wasn't that long ago when space was the next big thing in the stock market. Two years ago, special purpose acquisition companies, or SPACs, were all the rage -- and space stocks used the vehicles to go public. Companies including Astra Space (ticker: ASTR), which provides launch services; Earth observation company Spire Global (SPIR); and Momentus (MNTS), the FedEx of space, all came public with much fanfare -- and now trade for less than a buck. All told, the Procure Space exchange-traded fund (UFO), which counts among its largest holdings Iridium Communications (IRDM) and Viasat (VSAT) -- two companies that preceded the SPAC boom -- has fallen 36% over the past two years, far worse than the S&P 500's 1% decline.
Space could still be on its way to being a big business, even if the stocks have flopped. ProcureAM CEO Andrew Chanin points out the highest estimate for the "cislunar" economy -- that is, all the activity between the earth and moon -- is $10 trillion by 2050. The increasing frequency of rocket launches, along with the shrinking size and cost of satellites themselves, are creating early opportunities in space in everything from communications applications, Earth observation, satellite services, and construction. Later, permanent moon installations and commercial space stations will provide even more opportunities for growth.
The space value chain begins with launches. In 2022, there were 186 successful rocket launches, 41 more than in 2021, according to Deloitte. And more companies are getting into the action. SpaceX launched 61, more than one-third of the total, equal to the number of Chinese launches and more than every other country combined. Rocket Lab USA (RKLB) launched nine times in 2022. United Launch Alliance, the 50/50 joint venture between Lockheed Martin (LMT) and Boeing (BA), had eight launches. Companies can make from $20 million a launch for sending satellites into low earth orbit to $ 300 million a launch for taking astronauts to the International Space Station.
While launches get the most attention -- who doesn't thrill at the sight of a rocket leaving the pad? -- satellites are where the money is right now. Look at the sky on any given night and it shouldn't be more than 15 minutes on average before one streaks across your field of view. There are now an estimated 7,800 functional satellites in space, a number that's growing all the time. According to the Space Foundation, a nonprofit organization, operators deployed 2,354 spacecraft in 2022, a 36% annual increase.
Most of those fleets are made up of small, commercial satellites that can cost up to $100,000 each. While they have shorter life spans than traditional geostationary satellites, their comparatively low cost also makes them easier to upgrade. It's a dynamic seen firsthand by Jay Monroe, who has been involved in the space business since he led a rescue of satellite communications provider Globalstar (GSAT) from bankruptcy in 2004 and now serves as its executive chairman. The company is planning the launch of 17 satellites by the end of 2025 to replenish its fleet. Monroe estimates it will cost $500 million in total, with some support coming from Apple (AAPL), in exchange for reserving capacity for emergency messaging on new-generation iPhones.
"If you look back at Globalstar's first constellation, which began launching in 1998...those would have cost a multiple of what we're spending today to do the same technical function," Monroe says.
All those satellites are unlocking other opportunities. SpaceX and Globalstar aren't the only companies trying to connect cellphones to satellites -- other projects are under way by Iridium and AST SpaceMobile (ASTS). Satellite broadband is set to represent 50% of the projected growth of the global space economy by 2040, according to analysts at Morgan Stanley.
"This is a trillion-dollar market opportunity," says Mark Boggett, CEO of Seraphim Space, a space-focused venture- capital firm with a portfolio of 105 investments, including AST SpaceMobile. "This has the potential to turn one of the most important industries on its head."
Those satellites also offer the ability to monitor what's happening on earth. Russia's invasion of Ukraine is just the latest event to be tracked in minute detail from space. Artificial-intelligence tools could unlock new uses for satellite-generated data in areas such as climate-change monitoring, supply-chain planning, and military planning. The market for data and services from earth-observation companies is set to reach $7.9 billion by 2031 from $4.6 billion in 2021, according to research firm Euroconsult.
Big business doesn't guarantee good stocks. When Barron's put space on its cover in 2021, the excitement was palpable partly because a boom in capital raising by SPACs was providing cash to a bevy of space start-ups, including Rocket Lab, BlackSky Technology (BKSY), and others. The combined market capitalization of the new public companies was roughly $25 billion, while SpaceX was worth about $75 billion, giving them a combined value of $100 billion. The same group of space-stocks-plus-SpaceX is now worth about $145 billion, up 45%. Only now, SpaceX is worth roughly $140 billion and the rest have lost 90% of their value from their record highs.
Today, most of the space start-ups look too risky for investors. Before their mergers, the space companies that IPOed via SPACs had expected to generate sales of about $3.2 billion in 2023. That number will be closer to $1 billion, based on Wall Street's current projections. Start-ups such as Momentus, Astra, and Spire are now trading below $1, putting them at risk of being delisted by the Nasdaq stock exchange.
But even companies that have been at it for a while have to deal with the high costs and limited life spans of what they produce, making it a difficult area to invest in. For every winner like Iridium, which has gained 69% over the past two years, there's a company like Viasat, which has fallen 25%. They are also the kinds of businesses that might do better without the scrutiny of public markets -- one reason, perhaps, that Maxar Technologies, which provided imagery of Ukraine early in the war, was acquired earlier this month by a group led by private-equity firm Advent International for $53 a share, which values the entire company at $6.4 billion, or about 50 times estimated 2024 earnings.....
. Day 3, gained, lost, gained lost, made 400, blew 600
...Sometimes I get too greedy. I will give it a try again tomorrow. Going to leverage Webull this time around. I was watching youtubers that have become millionaires doing it so I going to give it a try.
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