About a week ago, on Saturday, May 22, Virgin Galactic Holdings Inc. (NYSE:SPCE) completed its third test flight.
The VSS Unity, a rocket-powered manned shuttle, took off from New Mexico and flew at three times the speed of sound to the fringe of space, 55 miles above sea level, and then glided back for a landing
The company’s founder, British billionaire Sir Richard Branson, has been working toward commercial space flights for tourists for about 15 years. So, for Branson and his investors, every successful test flight is an important milestone.
“Today was just an incredible step in the right direction,” Branson told the Associated Press. “It tested a lot of new systems that the teams have been building, and they all worked.”
While at least two more test flights are needed — though not on the calendar yet — Branson is still aiming for space flights with paying customers in 2022.
Beyond these 10-minute space vacations, we soon could be talking about orbiting space hotels, asteroid mining and humans on Mars.
This is cool stuff — the kind of thing we read about in pulp sci-fi paperbacks when we were 12-year-olds. The technology, if not the profit potential, is pretty much here.
And that’s the thing. As cool as space tourism is, I’m not sure it’s investment worthy yet — unless you have sky-high risk tolerance and a 20-year-plus outlook.
That said, the global space industry very much is a high-growth sector where retail investors can make a lot of money.
Battle of the Billionaires
Branson may have been the first to take his space tourism company public, but he isn’t the only billionaire dabbling in rockets. Elon Musk and Jeff Bezos also are competing to privatize human space exploration.
Musk’s SpaceX has had a leg up on the competition. It first flew a rocket to orbit in 2008. Both NASA and the Pentagon have also awarded the company lucrative contracts.
Meanwhile, Bezos’s Blue Origin has flown its New Shepard vehicle to space 15 times and is getting ready to fly its first mission with humans.
Additionally, Bezos has said he will leave his role as CEO of Amazon (NASDAQ:AMZN) later this year. Many believe this decision will allow him to focus on Blue Origin.
Cool stuff … but I wouldn’t recommend investing in Branson — or in Musk or Bezos once their space firms go public — except as highly speculative plays.
If you want to self-induce “space sickness,” just take a look at Virgin Galactic’s share-price chart over the past year. It dips and soars with every piece of news — and, in the space-launch world, every success looks spectacular … and failures often come in the form of literal explosions.
Moreover, in the last five quarters, Virgin Galactic has reported four negative surprises.
Investing in early-stage space stocks is clearly not for everyone.
However, manned spaceflight is just a small chunk of the space industry.
Currently, around 100 satellites are launched every year. But by the end of the decade, Euroconsult estimates, defense departments and intelligence agencies around the globe, telecommunications and internet companies, and others will be launching nearly 1,000 satellites every year.
For example, SpaceX and others are rushing to develop and launch thousands of communication satellites to meet the needs of internet consumers worldwide.
According to Euroconsult, by 2028, there could be 15,000 satellites in orbit.
Morgan Stanley predicts that the global space industry could generate over $1 trillion by 2040, up from $350 billion today.
That’s a high-growth sector we want to be in.
And I like one particular play right now…
A “Competitive Constellation”
Warren Buffett advises buying companies that possess a “competitive moat” — an advantage that secures their market share and growth potential.
The space company that I recommended to members of my trading service, The Speculator, possesses a “competitive constellation.”
That company is a leading space technology and intelligence company that traces its roots to the early days of space exploration.
Today, dozens of its satellites are orbiting Earth, and this constellation is gathering reams of data and delivering them in various forms to its government and corporate customers. As a result, nearly 4 billion people interact with this company’s technology every month.
Clearly, it has constructed an impressive “competitive constellation.”
But the company does face competitive threats from the likes of other established satellite companies as well as upstarts like SpaceX and Virgin Galactic.
In addition to these corporate threats, it must also grapple with the ongoing technological challenges of space travel and exploration. As astronaut Scott Kelly famously quipped after a SpaceX rocket explosion in 2015, “Space is hard.”
Space exploration failures can lead to charges in the tens of millions against earnings.
This company has compiled a long-term track record of success, despite intermittent setbacks, and I believe it will do so again … and reap sizable earnings growth as a result.
To learn how to get this recommendation as a Speculator member, click here.
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NOTE: On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls —in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.