Space Taxi Win Won’t Boost Boeing Stock

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American astronauts booking a trip to the International Space Station Space could soon have an alternative to buying a $70 million seat on a Russian Soyuz spacecraft now that NASA has awarded a $6.8 billion “space taxi” contract to Boeing (BA) and Elon Musk’s Space Exploration Technologies (SpaceX).

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And while space taxis are good news for NASA, the contractors and the commercialization of space, the deal is unlikely to give Boeing stock a big bounce in the near term.

The Facts

NASA Administrator Charles Bolden announced the split contract on Tuesday — Boeing will receive $4.2 billion to complete development of its CST-100 spacecraft. The CST-100 will launch on an Atlas V rocket and can transport as many as seven astronauts to low-earth orbit locations like the International Space Station.

The Atlas V, manufactured by the Boeing-Lockheed Martin (LMT) United Launch Alliance partnership, already has a $1.3 billion NASA cargo contract. BA is collaborating on the CST-100 capsule with Bigelow Aerospace, a Las Vegas-based space technology startup.

NASA also awarded SpaceX $2.6 billion for its Dragon V2 capsule — an upgraded version of the spacecraft NASA currently uses to send cargo to the Space Station. The Dragon V2 can carry up to seven people and is launched from SpaceX’s own Falcon 9 rocket. Orbital Sciences (ORB), which has a $1.9 billion contract to transport NASA cargo to the Space Station, did not compete for the space taxi.

If all goes well, space taxis could be ready for takeoff from Florida’s Kennedy Space Center in 2017. That’s none too soon for NASA, which has had to book astronaut travel on Russian Soyuz spacecraft since the U.S. space shuttles were retired in 2011. Given the growing strains in the U.S.-Russia relationship, the space taxis are fast becoming a necessity, rather than a luxury.

As NASA Administrator Charles Bolden wrote on Tuesday:

“Today we are one step closer to launching our astronauts from U.S. soil on American spacecraft and ending the nation’s sole reliance on Russia by 2017. Turning over low-Earth orbit transportation to private industry also will allow NASA to focus on an even more ambitious mission — sending humans to Mars.”

NASA’s contract award generates a lot of buzz and conjures up Star Trek dreams to “boldly go where no man has gone before.” But manned space flight has always been less about money and more about boundless imagination and international prestige.

That romanticism even shows up in Bolden’s choice of words in announcing space taxis. “Our destiny is set. Our course is laid out before us,” the former Space Shuttle mission commander said. “And we are following it. We hope the American people will be inspired to join us on this next great, ambitious leg of humanity’s journey farther into our solar system than ever before.”

Bottom Line for Boeing Stock

Boeing stock has slipped nearly 12% since its 52-week high of $144.57 nearly eight months ago, so it’s possible that Boeing stock will get a small bump from the new NASA space taxi contract. That said, don’t look for space taxis to be a huge catalyst for Boeing stock over the next two years — after all, BA’s space and networking unit accounts for less than one-tenth of Boeing’s $86.6 billion revenue in 2013.

So whether you were bullish or bearish on Boeing stock, the space taxi contract doesn’t change the story.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.  


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/boeing-stockl-space-taxi/.

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