Undervalued space stocks just got a little easier to find.
The Russian invasion of Ukraine has re-ignited the debate over the multi-billion-dollar Space Economy, putting the spotlight on space stocks again.
The Kremlin plans to sever its long-standing space partnership with the U.S. and could potentially build its own space station in the next few years. Additionally, China is also building its own space station.
The space sector was red hot a year ago, but most companies in the sector have lost their luster and many have become undervalued space stocks.
A lot of this sentiment is the result of their internal failures in pushing forward toward commercialization. However, the technology will only improve over time, and costs will likely decrease significantly.
Therefore, the space economy will become a reality sooner or later, which is why the current downturn presents a tremendous buying opportunity to buy undervalued space stocks ahead of one of the biggest megatrends in recent memory.
| SPCE | Virgin Galactic | $5.93 |
| ASTR | Astra | $1.05 |
| MAXR | Maxar | $24.76 |
Virgin Galactic (SPCE)
Virgin Galactic (NYSE:SPCE) was touted as the front-runner in the space sector after its blockbuster IPO in 2019 and it now often makes the list of undervalued space stocks.
Its stock has been in free fall for the past couple of years. The company has failed to live up to its promises, and continual delays and failed launches have investors worried about its future.
Nevertheless, despite the sizeable risk surrounding the investment, there is a long-term case that can’t be ignored. Moreover, having lost over 73% of its value in the past year, it’s much more attractive than ever.
Michael Colglazier, the firm’s Chief Executive Officer, talked a big game during the second quarter earnings call. He stated that commercial service is targeted for the second quarter of 2023, and they continue to put in place new initiatives to drive future success.
It includes the recent agreement with Aurora to develop new motherships, the acquisition of new land in New Mexico for its Astronaut training campus, and the selection of Phoenix State to house its new factory.
If SPCE can successfully commercialize suborbital flight technology, it could become a major player in the space tourism sector. Nevertheless, it remains a speculative play at best.
Astra (ASTR)
Astra (NASDAQ:ASTR) specializes in developing scalable small rockets that can be launched more often than its peers.
In its relatively short history, it has achieved plenty of milestones. It reached orbit more quickly than its competitors, in just over five years, while most of them take more than six years. Moreover, it has contracts with the U.S. Space Force and NASA, which is a massive nod of approval.
Given its small rocket ships’ scalability, it aligns with the U.S. government’s plan to launch spy satellites from different locations on Earth.
It plans multiple launches this year and is likely to be more in the news than its peers. Moreover, it recently announced the development of a new rocket ship that offers double the payload capacity of its competitor, Rocket Lab.
On top of that, Astra has plans to launch 13,000 satellites in three primary phases to offer satellite broadband services. ARK Funds believes that satellite broadband revenues could potentially reach a colossal $40 billion worldwide in the next 5-10 years.
Maxar (MAXR)
Maxar (NYSE:MAXR) has more than 50 years of experience in manufacturing satellites and spacecraft components.
It has two main operating segments: Space Infrastructure and Earth Intelligence. The latter has been doing the heavy lifting while the former continues to generate robust margins.
We saw how instrumental Maxar’s satellites were in capturing digital images from the Ukraine war. Moreover, the majority of news media outlets built entire stories around the imagery released by the company. Hence, it’s plausible to assume that its business with the U.S. Department of Defense would be booming.
At the conclusion of the second quarter, its backlog stood at a remarkable $2,945 million, compared to a couple of quarters ago, when the figure stood at $1,893 million.
Based on its order backlog and future outlook, the stock trades at a highly attractive price. It currently trades at just 1.07 times forward sales, which is well below the sector median. Moreover, it also offers a modest dividend to sweeten the deal further.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
