With billionaires headed into the atmosphere, these space stocks could be headed to the moon
Recent news may be renewing enthusiasm for space stocks. But don’t think that the spaceship has sailed, so to speak. This month, we’ve seen successful launches from Amazon (NASDAQ:AMZN) founder Jeff Bezos’ Blue Origin and Richard Branson’s Virgin Galactic (NYSE:SPCE). Yet the “billionaire space race” is still only in its early stages.
Both contenders appear set to make more progress in the coming years. According to analysts at UBS, space tourism revenues could hit $4 billion by 2030. Moreover, a third contender in the billionaire space race — Tesla (NASDAQ:TSLA) CEO Elon Musk’s SpaceX — has its eye on this market as well. Unlike the first two, though, Musk has so far focused more on diversifying his early-stage space company. That is, with its NASA contracts and Starlink WiFi project, SpaceX may have the greatest prospects.
Of course, it’s tough to directly gain exposure right now to this space race — Virgin is publicly traded, but Blue Origin and SpaceX remain privately held. Yet, these three contenders aren’t the only names that can give you exposure to the megatrend. These seven space stocks also have a shot of going “to the moon,” as what was once science fiction becomes an economic reality:
- Astra Space (NASDAQ:ASTR)
- AST SpaceMobile (NASDAQ:ASTS)
- Iridium Communications (NASDAQ:IRDM)
- Lockheed Martin (NYSE:LMT)
- Loral Space and Communications (NASDAQ:LORL)
- Maxar Technologies (NYSE:MAXR)
- Vector Acquisition (NASDAQ:VACQ)
Space Stocks to Buy: Astra Space (ASTR)
The recent “billionaire space race” headlines may be generating more interest in space stocks. But so far, it hasn’t done much to move this one’s needle. Rather, this former special purpose acquisition company (SPAC) has been trending lower since its “deSPACing” on Jul. 1. However, now it has pulled back below $10 per share. Yet at today’s levels, ASTR stock may be a space-related play to keep an eye on.
Why? Well, Astra — which facilitates rocket launches for third parties (such as communications satellite companies) — stands to benefit greatly from the acceleration of commercial satellite launches, which is projected to occur before the decade is out.
As the company broke it down in its SPAC merger presentation, this could translate into annual sales of $1.5 billion and adjusted EBITDA of $694 million by 2025. Not bad for a stock that, at today’s prices of around $8.70 per share, has a market capitalization of $2.2 billion.
Astra Space may not yet be a household name. But with its own set of billionaire backers, such as Bill Gates and Craig McCaw, I wouldn’t say its any sort of long-shot underdog. It may be going after a less “sexy” aspect of the space economy. Even so, consider this a solid name to buy and potentially profit off commercial satellites moving forward.
AST SpaceMobile (ASTS)
As I put it on Jul. 6, “worthwhile moonshot” may be the best way to describe AST SpaceMobile. This is mostly based upon the take expressed by Deutsche Bank in its bullish call on the stock late last month.
In a nutshell, Deutsche Bank’s take on ASTS stock is this: shares in the company — which is working on a space-based cellular network — have a chance to someday be worth many times what they trade for today. And conversely, if its plans fail to take off? This pick of the space stocks stands to fall to zero. Putting it simply, this may be a play only for investors who can stomach the possible volatility along the way.
That said, this analyst call has helped boost the stock. Yet, don’t take this to mean its all upward moves from here. Before it really begins to go “to the moon,” shares of ASTS could just as easily dip back down to single-digit prices.
Valued on its future potential (such as projected sales of $16.5 billion by 2030), any sort of hiccup could result in an outsized drop as investors lose confidence. On the flipside, if we see further developments that indicate it can live up to expectations? A trip back to $20 or more may not be out of the question.
Space Stocks to Buy: Iridium Communications (IRDM)
Getting its start in the late 1990s, Iridium is hardly a new kid on the block. In its first years in business, you could say that its satellite phone service was the right technology at the wrong time. But in the course of 20-plus years, after its initial missteps? This company has built itself into a stable business catering to commercial and governmental end-users, providing satellite-powered voice and data services.
Investors, however, aren’t interested in IRDM for its current operations, which generate around $600 million per year in annual sales. Why has IRDM stock been surging? Its potential to finally experience a “payoff” moment in the years ahead.
As InvestorPlace’s Joanna Makris discussed back in April, an increased demand for its services — particularly when it comes to IoT (Internet of Things) applications — bodes well for Iridium. Given it can support this increased business with its existing infrastructure, expect most of this to fall straight to its bottom line.
Of course, with its more than 350% gain over the past five years, buying now may leave you feeling like you are late to the party. But as the company continues to beat estimates, raise its outlook and benefit from trends, consider this pick of the space stocks today.
Lockheed Martin (LMT)
Obviously, Lockheed Martin may be the most indirect name on this list to play the “space stocks” trend. Naturally, the defense-contracting giant’s bread and butter is still its business providing military hardware like aircraft, aerospace systems, missiles and weapons systems.
Yet, don’t discount Lockheed’s space systems unit completely out; someday, it could be a driver for LMT stock. As one Seeking Alpha commentator put it back in March, the company’s continued move into space-exploration contracts may make it the “stealth space investment” after all.
What’s more, assuming the company finally gets to close on its proposed purchase of Aerojet Rocketdyne (NYSE:AJRD), this may be even more the case pretty soon. The deal itself was announced back in December 2020. However, with rivals like Raytheon (NYSE:RTX) against the proposed transaction and politicians chiming in with antitrust concerns, there’s still a chance this deal fails to obtain Federal Trade Commission (FTC) approval.
That said, looking at the past as a prelude, chances are this transaction will be completed. And besides its space-related catalysts, there are other factors that make Lockheed Martin appealing as well. These include its low valuation (a forward price-to-earnings (P/E) ratio of 13.95 times) and its 2.78% dividend yield. So, at around $373 today, this diversified defense stock with space exploration exposure may be a more cautious way to play the trends.
Space Stocks to Buy: Loral Space and Communications (LORL)
Satellite communications play LORL stock experienced a hot run in late 2020 through early 2021. Of course, shares have sold off over the past few months. However, this name is still up more than 98% over the past one year. This is primarily due to its plans to merge with Telesat Canada, of which it already owns a 62.7% economic interest.
Outside of its Telesat holding, Loral’s only other asset is its 56% stake in Xtar, a joint venture that provides telecom services to governmental clients. This transaction’s main benefit is that it simplifies the corporate structure of Loral. Previously, it’s been tough to value the stock due to its opaque nature.
Much of this benefit has already likely been factored into the LORL stock price. Yet, there is another factor that could give it another boost long-term. As InvestorPlace’s Joel Bagole wrote on Jul. 8, Telesat’s $5 billion Lightspeed satellite endeavor may help it keep emerging competition like Starlink at bay.
It will probably be a while before this name could possibly go on par again with its previous hot run. But pulling back since March (when it hit prices topping $50), consider Loral as one the space stocks for your radar. Today, it trades for around $36 per share.
Maxar Technologies (MAXR)
When talking about the potential of MAXR stock to “go to the moon,” it may be more accurate to say its possible “return to the moon.” That is, shares in this satellite imagery company already rocketed from May 2020 through February 2021. As you likely know, that’s when retail investor enthusiasm for high-concept stocks climbed to its zenith. At one point during that time frame, shares had soared more than fivefold.
Since then, however, Maxar shares have slid, now trading just under $35 per share as of this writing. Yet, as the dust settles on its market beat down, this may be a solid “buy the dip” situation. How so? Based on next year’s earnings projections ($1.34 per share), shares may be reasonably priced relative to growth, with an implied forward P/E of 25.3 times.
There are also some other factors which bolster the idea that this company’s growth is on track. In their initial coverage of the stock, Morgan Stanley’s Matthew Sharpe gave shares a “buy” rating and a $50 price target. His rationale? The analyst “expects revenue growth to accelerate ahead of the planned “WorldView Legion” constellation that begins to come online later this year.”
Of course, there are still some negative factors working against MAXR, such as a shareholder lawsuit related to a past merger. Subsequent news from this could weigh down on the stock some more. However, given the many other positives for this pick of the space stocks, an eventual move back toward its past $58 high-water mark appears likely.
Space Stocks to Buy: Vector Acquisition (VACQ)
Last up on this list of space stocks is Vector Acquisition. As you might expect, the SPAC selloff took some wind out of this blank-check company. But Vector, in the process of merging with privately held satellite-launch service provider Rocket Lab, could still be an appealing opportunity. It all just depends on how VACQ performs post-merger.
What’s the latest on the transaction? The shareholder vote is set to happen on Aug. 20. So, assuming shareholders approve the deal, the transition of VACQ stock into RKLB stock may be just a few months away.
Like other SPAC stocks, this name is being valued more on its future potential. Per numbers provided in its merger presentation, the combined company will have a market capitalization of around $5 billion, based on its recent close at $10.46. Compared to its projected revenue for 2021 ($69 million), this appears very pricey.
However, assuming it lives up to its projections, Rocket Lab could scale into a $1 billion-plus business within the next five years. Expecting high operating margins, there may be plenty of room for this stock to rise in value over the long-run. True, we may not see shares take off immediately after the deal closes. But pouncing on VACQ stock while most investors are too impatient to hold could end up being a profitable move.
Note: This article originally appeared at InvestorPlace.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.