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The next frontier is here. But is it time to add space stocks to your portfolio? Let’s find out in this analysis of the best space stocks.
The Case for Space
On the All-In Podcast, David Friedberg equated today’s space opportunity to 15th-century maritime shipping.
At the time, it was impossible to predict what would come of it, but the ensuing technological advances changed humanity.
It led to insurance, global trade, and the concept of carry in the financial world. Today, there are cruise ships and submarines.
Who in 15th century Europe could have considered these outcomes?
Humanity has no way of knowing what will come of space exploration because downstream innovation will come as a result of going.
The technology and concepts won’t exist unless we go.
In the meantime, companies providing satellite internet are likely your best bet amongst space stocks.
Space tourism grabs headlines, and that’s beneficial in its own way; it’s still far off from being good business.
Ok, let’s get into the best space stocks. We’ll break them into categories so you can see the tiers of competition.
Best Legacy Space Stocks
The legacy aerospace and defense companies were the first to flirt with space, and they’re still a good bet on the future of exploration.
However, they are not pure-play space stocks.
#1. Boeing (BA)
In addition to building most of the world’s planes, Boeing is heavily involved in space.
For example, Boeing enables research on the International Space Station, provides returning crew launch capabilities with its commercial spacecrafts, launches rockets into orbit with its joint ULA venture with Lockheed Martin, and builds high-bandwidth communications between Earth-orbiting spacecraft and facilities on the ground.
Additionally, Boeing designs and builds space communication systems for military, commercial, and scientific use in the following areas:
- Advanced digital payload
- All-electric propulsion
- 3D manufacturing capabilities that can operate in the geosynchronous (Earth-centered), medium-Earth-orbital, or low-Earth-orbital planes
Boeing plays a key role in the military-industrial complex and has embedded itself in this country’s national security.
As geopolitical tensions rise over claims to space, expect government agencies to turn to Boeing — and the next name on this list.
#2. Lockheed Martin (LMT)
Lockheed Martin and Boeing’s space operations are similar and aligned — so much, so they teamed up to create the United Launch Alliance.
Lockheed Martin’s space segment builds satellites and spacecraft for government and commercial customers.
But that’s not all. The company’s CEO, Jim Taiclet, believes providing 5G connectivity to the military’s weapons will differentiate Lockheed Martin from its competition.
The timing on this initiative could not be better — the Defense Department just signed off on the Pentagon’s connect-everything strategy, called Joint All Domain Command and Control (JADC2), the department’s first-ever comprehensive strategy to digitally interconnect its weapons systems and sensors.
Taiclet has booked several partnerships with commercial companies to power LMT’s role in these developments, including Qualcomm for wireless capabilities, Omnispace for space-based 5G network, and General Motors for lunar rovers.
Taiclet’s decision to digitize Lockheed’s operations is vital for the company’s long-term success, especially for space-related endeavors. However, there could be some friction in the transition.
#3. Northrop Grumman (NOC)
Northrop Grumman designs, develop, and supports some of the world’s most advanced products, ‘from cutting-edge aircraft and next-generation spacecraft to unrivaled cybersecurity systems and all-seeing radars.’
NOC has been pioneering space for over 60 years. Here are some of its missions:
- Global Security for the US: ground-based strategic deterrent, missile warning, missile defense, protected SatCom, space mobility and logistics, space launch, and propulsion systems
- Civil and Commercial Space: space exploration, space science, weather/earth observation, space mobility and logistics, space launch and propulsion systems, satellite communications
Like Jim Taiclet, Northrop’s CEO Kathy Warden has her eyes on digitization.
The Pentagon’s 2022 fiscal budget calls for $2.3 billion on microelectronics, $398 million for 5G network capability, and $874 million on artificial intelligence.
Investing in these technologies will strengthen the U.S.’s supply chain, and ultimately its national security on Earth and in space.
Best Space Stocks for Growth
This next section will explore the best space stocks for growth.
They are either newer companies or have products and services that are poised for investment returns in the shorter to medium term, such as satellite internet.
#4. Virgin Galactic (SPCE)
Virgin Galactic is a spaceflight company that aims to provide suborbital flights to space tourists.
Virgin Galactic’s founder, Richard Branson, completed the world’s first space tourism flight on July 12th, 2021.
The flight included two pilots, Branson, three Virgin Galactic employees, and millions of viewers worldwide.
Following the flight, Branson said, “To the next generation of dreamers, if we can do this, just imagine what you can do.” It was truly a remarkable event for humanity.
But not so much for Virgin Galactic’s stock. Shares of SPCE crashed as much as 20% after the successful flight.
This reveals how investors look at Virgin Galactic. Space tourism at scale might still be decades away. The price aboard a Galactic flight is believed to be $250,000 per ticket.
Wall Street expects Virgin Galactic to make around 200 flights in 2022, a good start to satisfying the 600 astronauts who have signed up for flights.
#5. Rocket Lab (VACQ)
Barron’s calls Rocket Lab USA a ‘mini-SpaceX that investors can buy today.’
Rocket Lab engineers its own rockets, launches satellites into orbit and has missions planned for the Moon, Mars, and Venus.
But Rocket’s focus on vertical integration is why it draws SpaceX comparisons.
Like Tesla (TSLA), SpaceX aims to control its products and services from cradle to grave. This requires enormous upfront costs in exchange for more profits and flexibility down the road.
Rocket Lab’s approach is similar. CEO Peter Beck says, “Rocket Lab is an end-to-end space company.”
Rocket Lab has built its own constellation of satellites to provide space-based internet to customers, which will change humanity as more than 3 billion people do not have access to the internet.
It has completed 18 launches since its founding in 2014, deploying 97 satellites for its +20 customer base.
#6. Kratos Defense & Security (KTOS)
Kratos makes products for national security and communication needs for the U.S. military, government, and commercial sectors.
It specializes in unmanned systems, satellite communications, C5ISR, warfighter training, and combat systems.
Kratos is included in this article for its satellite and rocket segments, which are playing a key role in the satellite industry’s digital transformation.
KTOS has a market cap of just $3.3 billion, and its stock is up 50% in the last year.
KTOS revenue and net income are up 15% and 1050% YoY, respectively.
#7. L3Harris Technologies (LHX)
L3Harris is a technology and defense contractor company that specializes in surveillance solutions, microwave weaponry, and electronic warfare.
L3Harris has four business segments:
- Integrated Mission Systems
- Space & Airborne Systems
- Communications Systems
- Aviation Systems
Each of these divisions includes a space component in some way.
In fact, NASA recently selected L3Harris Technologies to develop a concept for the next generation of geostationary weather imagers to better track and observe weather and climate.
L3Harris’ latest project is developing future NATO surveillance concepts.
It will work with an undisclosed team of ‘leading international defense and technology companies to replace NATO’s aging Airborne Warning and Control System fleet by 2035.
L3Harris has a market cap of $46 billion, does $18+ billion in annual revenue, and has a presence in more than 100 countries.
#8. Iridium Communications (IRDM)
Iridium provides satellite voice and data communications services to businesses, the U.S. and foreign governments, non-government organizations, and consumers worldwide.
It has the only Internet of Things (IoT) network that covers 100% of the globe.
Demand for IRDM’s services will likely ramp up as the connected device market expands.
Iridium is the perfect example of the ‘short to medium term’ investment opportunity we keep emphasizing. However, the IRDM opportunity is not a secret.
The stock is up 400% in the last few years and isn’t sneaking up on anybody.
Moving forward, its main competitors in the satellite constellation market will be SpaceX and Rocket Lab.
Best Space Stocks to Watch
The space companies with the most potential are still private but will eventually hit the public markets.
Let’s explore their DNA before you can add them to your portfolio.
#9. SpaceX & Starlink
Elon Musk’s SpaceX was most recently valued at $74 billion dollars, a 60% increase from its previous capital raise just six months prior.
So why the significant increase? Starlink.
Starlink began as a side project at SpaceX and now may become Elon Musk’s most valuable creations.
Starlink is a low-Earth global satellite internet network with about 2,000 satellites in its constellation.
Musk plans to increase this number to 42,000 in the coming years, which will help Starlink make internet services available to everyone on the planet.
Bandwidth and latency are a function of the number of satellites in the network, so the more satellites, the better the connectivity.
While Starlink is the new shiny toy, let’s not forget about SpaceX’s core business: launch services.
SpaceX’s reusable rocket technology is revolutionizing the space industry. Its breakthroughs are significantly cutting the costs traditionally associated with space travel.
This innovation led SpaceX to achieve many ‘firsts’ in the space community, including:
- First privately funded liquid-propelled rocket to reach orbit
- First private company to successfully launch, orbit, and recover a spacecraft
- First private company to send a spacecraft to the International Space Station
- First vertical take-off and vertical propulsive landing for an orbital rocket
- First reuse of an orbital rocket
- First private company to send astronauts to the International Space Station
SpaceX is the clear leader in this market. Unfortunately, it may be some time before you can add it to your portfolio.
Musk wants to achieve regular missions to Mars prior to taking SpaceX public. The company plans to have crewed missions to Mars beginning in 2024, so sit tight.
#10. Blue Origin
Blue Origin was founded by Jeff Bezos with ‘the vision of enabling a future where millions of people are living and working in space to benefit Earth’
Like Richard Branson, Bezos is putting his life on the line to achieve this mission.
Just eight days after Branson’s successful flight into space, Jeff Bezos and Blue Origin took a trip of their own and ‘actually’ made it into ‘space.’
Bezos has had his eyes on space for decades and recently stepped down as Amazon’s (AMZN) CEO to focus on Blue Origin and the next frontier.
Bezos has privately funded Blue Origin since its founding in 2000, annually selling $1 billion worth of Amazon stock to finance operations.
Amazon began as a bookstore, and now it runs the world. Blue Origin began as a space company, and who knows what it will become.
#11. Relativity Space
Relativity Space is an aerospace company that develops manufacturing technologies, launch vehicles, and rocket engines for commercial orbital launch services.
However, Relativity’s differentiator is how it manufactures.
The company 3D prints its rockets, engines, and vehicles – a completely digitized manufacturing process that enables faster, more frequent, and lower-cost access to space.
The company’s website states, “From raw material to flight in 60 days.”
This approach has enabled Relativity to build the first autonomous rocket factory and launch services for satellites.
Relativity is venture-backed by the dictator himself, Chamath Palihapitiya, who described the company’s advantage on The All-In Podcast: “Take the price of a rocket and divide it by ten.”
Compared to the traditional rocket, Relativity’s process requires 100x fewer parts, 10x faster production time, and no fixed tooling or simple supply chain.
Iterations are the difference-maker in the space industry, and the company that can make faster, more frequent, and more affordable iterations has the advantage.
That company appears to be Relativity Space.
#12. Swarm Technologies
Swarm makes small satellites that allow it to operate the world’s lowest-cost two-way satellite communications network.
Swarm is targeting the IoT market in areas without cell or WiFi infrastructure, which makes up nearly 90% of the Earth’s surface.
People in these areas have two options: pay exorbitant amounts for data service and hardware, or go without connectivity.
Swarm wanted a third option, so they built affordable and easy-to-use products with global coverage.
However, Swarm’s technology can be applied to more than just smartphones and will impact industries like agriculture, maritime, energy, environmental, and ground transportation.
Manufacturing of IoT devices is outpacing connectivity capabilities. Estimates suggest that 75 billion IoT devices will come online by 2025. We expect Swarm to capitalize on this opportunity.
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Alternatives to Space Stocks
Alright, that’s the 12 best space stocks — eight of which you can add to your portfolio today.
But if you’re having trouble deciding on which stock to pick, consider one of the following ETFs for narrow diversification within the space industry.
- ARK Space Exploration ETF (ARKX)
- Procure Space ETF (UFO)
- SPDR S&P Kensho Final Frontiers ETF (ROKT)
- The 3D Printing ETF (PRNT)
It’s also important to be aware of the FAAMG presence in space, specifically Amazon and Google.
By no means is AMZN or GOOG a pure-play space bet, but you have some indirect exposure to space-related operations if they’re in your portfolio.
Bottom Line: Best Space Stocks
Patience might be best when it comes to space stocks. Balancing growth in the public names versus disruption once the privates go public is a tough balance to find.
Either way, space exploration is back.
This article is for informational purposes only. It is not intended to be investment advice.