Last year was a busy one for the space stocks, despite the crippling impact of the novel coronavirus on the global economy. The industry’s 2020 highlights include mission launches to Mars, SpaceX’s human spaceflights for NASA, and return missions from the moon and asteroids.
There has been a massive step-change in the sector from government-backed space programs to enterprise-backed space programs. Moreover, the declining costs of spacecraft development and the advances in data analytics have positively impacted the private investor sentiment.
Morgan Stanley suggests that the industry could grow from $350 million to over $1 trillion by 2040.
With massive money being poured into the sector, several new markets and growth opportunities are opening up. Some of these include space tourism, satellite-based internet, reusable rockets and others. However, investors must avoid herd behavior and look for space stocks that could provide sustained returns in the near future.
Here are three space stocks to buy, representing companies that appear to be driving the industry forward:
Space Stocks To Buy: Virgin Galactic (SPCE)
Billionaire Richard Branson’s Virgin Galactic was founded in 2004 with the singular aim of turning the science fiction-esque concept of space travel into a reality.
After merging with Chamath Palihapitiya’s SPAC in 2019, the company has taken off and is ever so close to its first human spaceflight. The market appears to be buying into its claims as SPCE stock is up 24% in the past 12 months.
It hasn’t been all smooth sailing for the company of late, though. It had planned to begin commercial operations last year, but the pandemic played spoilsport. There was a failed test back in December and, despite reopening its test-window in February, it had to reschedule things again.
However, management believes that its troubles are only temporary, and if anything, the delayed recovery from the pandemic gives it time to fine-tune things even more. Virgin Galactic states that each of its spaceports could potentially bring in $1 billion in revenues. Therefore, there is a lot of upside potential to the stock.
Lockheed Martin (LMT)
Lockheed Martin is the world’s largest pure-play defense contractor with the most well-rounded business in its sector. However, it has an established space business, and it’s currently the third-highest revenue generator amongst its four operating segments.
It generated roughly $11.8 billion in revenues from the $65.4 billion the company made in 2020. Revenues from the segment have grown 9.4% year-over-year. In 2021 though, space could significantly expand the company’s revenue base and push LMT stock higher.
A lot of the buzz surrounding Lockheed’s space operations is down to the planned acquisition of its rival rocket company Aerojet Rocketdyne (NYSE:AJRD) in a $5 billion all-cash transaction. Aerojet is a key supplier of several of Lockheed’s missiles and will expand the company’s abilities in hypersonics.
Lockheed has one of the majority of its key contracts in hypersonics; controlling most of the supply chain is logical. Moreover, the acquisition will also allow Lockheed to play a more significant role in NASA’s massive Space Launch System project. Though it’s building the Orion capsule, which sits atop the SLS, it has little role in developing the rocket itself. The acquisition of Aerojet provides it’s the necessary tools to expand its utility in this regard further.
In the not-so-distant future, Lockheed’s space business could outpace the growth in its core operating segments.
Maxar Technologies (MAXR)
Maxar Technologies is a U.S.-based space company that provides manufacturing communication, earth intelligence, and space infrastructure services. The company has evolved into a major defense firm with clients across all major continents.
It continues to provide its customers with high-quality communications and digital solutions, which has pushed MAXR stock 193% in the past 12 months.
Earnings results have been a hit and miss in the past few quarters. In its most recent quarter, revenue was up a modest 6% year-over-year, with its less-profitable segment space infrastructure rising 12%. However, its order backlog has grown substantially and is now at an impressive $2.2 billion.
Moreover, it will be launching its much anticipated SiriusXM-7 satellite for orbit this year, along with other product offerings. With the rising tensions amongst countries such as the U.S., China, Russia and others, the demand for the company’s learning algorithms and 3D models will only improve in the future.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.