The business of space is attracting big bucks.
The space industry is taking off. Last year saw a global record of 145 launch attempts, with 45 of those coming from U.S. spaceports, according to the nonprofit advocacy organization Space Foundation. Venture capital funds in 2021 put $17.1 billion into 328 space companies, beating the prior record of $9.1 billion from 2020, according to Space Capital. Although Elon Musk’s Space X and Jeff Bezos’ Blue Origin remain private, there are plenty of publicly traded companies or exchange-traded funds involved in the business of space. Here’s a look at seven of them.
Astra Space Inc. (ticker: ASTR)
Space exploration has always had setbacks, but humans keep making progress reaching for the stars. In February, problems with an Astra rocket caused the loss of four NASA-funded satellites and a steep drop in the company’s shares. “Astra’s recent travails show just how difficult it is to join the club of launch startups jockeying to offer cheaper methods of lofting objects into the heavens,” says Randy Baron, portfolio manager with Pinnacle Associates. Since the botched mission, the company launched an investigation and identified the problems. But it’s also been moving forward commercially, announcing a multi-launch contract with a launch services provider and a deal to provide engines to a satellite design and manufacturing company. Its shares remain earthbound, but that could prove a bargain if the company can make good on its plans to offer daily launches by 2025.
Mynaric AG (MYNA)
The business of space isn’t just about startups positioning themselves to win the most customers for their launch services. Baron says new business models are emerging that take their cues from the successful software-as-a-service model in the tech industry. Those include space data as a service, satellites as a service and ground stations as a service. “All of these promise the benefits of space without the demands of one-off satellite manufacturing, government regulation, launch integration or space data delivery,” he says. Space as a service will rely on communication over next-generation internet service. Baron likes Mynaric, a specialist in laser-based communication networks. “Telecommunication experts consider laser communication technology to be a key enabler underpinning the infrastructure of the internet of the future,” the company says.
Iridium Communications Inc. (IRDM)
Baron also likes Iridium, which has a constellation of satellites that provide voice and data service all over the planet. It also sells devices such as satellite phones. In its most recent quarterly reporting period, Iridium said total billable subscribers grew 17% year over year to more than 1.78 million. The expansion was driven by growth in its commercial “internet of things” business. Revenue from equipment sales was $33.7 million during the quarter, 41% higher than the year-ago period. The company is projecting 2022 service revenue growth of 5% to 7% from 2021 service sales of $492 million.
Rocket Lab USA Inc. (RKLB)
This company hasn’t been on the stock market for long, going public via a special-purpose acquisition company last year. But it was founded in 2006 and has launched more than 100 satellites into orbit. “RKLB stands out as a newer company, with a higher risk/higher reward trade-off,” says Uri Gruenbaum, CEO of TipRanks. “With the SPAC hype of 2021 behind them, RKLB can now look to regather and start creating their growth narrative.” An analyst consensus on TipRanks forecasts an average price of $19.33 over the next 12 months. That would represent growth of more than 240% from the May 9 close of $5.67.
Lockheed Martin Corp. (LMT)
Turning to larger players, Kunal Sawhney, CEO of Kalkine Group, points to this large defense contractor. “Marketplaces are volatile, and seasoned investors might want to bet on companies that are impacted the least by supply chain disruptions,” he says. “Large-cap players generally have the elbow room to manage such short-term concerns, besides having a relatively more stable and diversified revenue model due to their market dominance.” In its most recent quarter, Lockheed reported nearly $15 billion in revenue, with more than $2.5 billion coming from its space division. “It remains a relatively better bet in space stocks, not to mention the dividend income that accrues to the investor,” Sawhney says. Keep in mind that the company’s diverse revenue stream means even if the space segment does really well, other parts of the company might suffer if, for example, the Pentagon’s budget gets cut.
Procure Space ETF Trust II (UFO)
If you want exposure to the business of space but don’t want to do the homework that’s involved in picking individual stocks, a space-themed exchange-traded fund may be for you. “Investing in only one space company at a time is highly speculative, and the odds of losing money are extremely high,” says Michelle Connell, owner and president of Portia Capital Management. It’s better to invest in a basket of companies, she says, pointing to UFO. With no company in its top 10 holdings making up more than 6% of the total ETF weighting, “the odds are very high that some of these companies will deliver their services and be profitable for their investors,” she says.
ARK Space Exploration & Innovation ETF (ARKX)
Another ETF for investors to consider is this fund, which focuses on innovation in companies “leading, enabling or benefiting from technologically enabled products and/or services that occur beyond the surface of the Earth,” the fund’s website says. That includes orbital and suborbital aerospace companies, those that develop enabling technologies and those whose operations stand to benefit from aerospace activities. “Satellite broadband revenues could approach $10 billion per year in the U.S. and $40 billion globally during the next five to 10 years,” ARK Investment Management says. The fund’s top holdings include Iridium, but others are more down to earth, such as Japanese manufacturer Komatsu Ltd. (KMTUY), which makes construction, mining and forestry equipment.
Space stocks and ETFs to watch:
— Astra Space Inc. (ASTR)
— Mynaric AG (MYNA)
— Iridium Communications Inc. (IRDM)
— Rocket Lab USA Inc. (RKLB)
— Lockheed Martin Corp. (LMT)
— Procure Space ETF Trust II (UFO)
— ARK Space Exploration & Innovation ETF (ARKX)
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7 Space Stocks and ETFs to Watch originally appeared on usnews.com
Update 05/10/22: This story was published at an earlier date and has been updated with new information.
