After rising nearly 60% in a span of a few short days in late June and early July, Astra Space’s (NASDAQ:ASTR) stock has dropped to the $9 price level. While ASTR stock is trading below its 100-day and 200-day moving averages, it is quite tempting to buy the shares at its current levels.
I typically avoid purchasing stocks that could be entering downtrends, as shown by their moving averages. However, Astra is such an interesting company that its shares may still be worth buying despite their recent downturn.
Astra’s Rocket Failed
Astra had a major setback recently, causing its stock price to languish. Specifically, its rocket failed to reach orbit. Its launch attempt was the company’s third effort to propel a rocket carrying a payload into space.
The first rocket crashed almost immediately because its guidance system failed after its launch. The second attempt reached space but ran out of fuel before attaining orbit.
On this third attempt, Astra tested its Launch Vehicle 0006, which is part of the company’s Rocket 3.3 series. The rocket was carrying a mass simulator that approximated the weight of an operational satellite. The simulator was supposed to be placed in orbit
There were signs of trouble right at the start of the launch. First, the rocket moved dangerously sideways for a few seconds instead of launching straight up. Despite that issue, the rocket was able to recover and reached an altitude of about 20.5 miles. But the mission was terminated within a few minutes of the launch as the mechanical stresses on the rocket were tearing it apart.
The silver lining of the setback was that there were no injuries and the company was able to collect data from the launch. It turns out that sending rockets into space is incredibly difficult.
You can ask Elon Musk about that. His company, SpaceX, also suffered a series of failures, including some rockets that exploded in mid-flight.
Building advanced experimental rockets is an incremental process. Companies are not always able to successfully send them into space right in their initial attempts. Every rocket, however, should perform better than its predecessors. In this case, Astra will go back to the drawing board and make adjustments once again.
I agree with Carolina Grossman, Astra’s director of product management, who said “Although we did not achieve our primary objective today, our team will work hard to determine what happened here. And as we dig into the flight data, we are optimistic about the future and our next attempt.”
Astra’s Long-Term Outlook Remains Bright
In these types of situations, it is imperative for investors to be patient and focus on the long-term. ASTR stock fell approximately 19% on the first trading day after the news of the launch’s failure was reported.
The decline was likely largely caused by short-term traders who immediately sold the name at the first sign of trouble. Astra’s fundamentals haven’t changed at all.
I am fairly confident that the team at Astra will eventually recover from this setback. The company, after all, is led by a “who’s-who” of the space industry. Its CEO and co-founder Chris Kemp, previously was the Chief Technology Officer of NASA.
The company’s other co-founder, Dr. Adam London, has tremendous experience working with miniature rocket technologies in partnership with NASA and DARPA. The rest of the team is made up of ex-SpaceX employees and other authentic aerospace veterans.
ASTR stock remains speculative and is not for the faint of heart. However, Astra has as good a chance as any space start-up to be successful. If the company does succeed, ASTR stock can easily soar five to ten times above its current levels.
On the date of publication, Joseph Nograles held a long position in ASTR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
