After soaring in 2020, space stocks return to earth as many companies descend from their previous highs. In 2020, space stocks returned 64% as a collective group; 2022 marked a hefty 12% loss (though still outperforming the S&P 500. While the verdict for 2023 isn’t yet in, expect space stocks to be fairly flat to close the calendar year.

But space still presents a viable long-term investment opportunity for those smart enough to avoid overblown hype and impractical prospects. Barron’s projects the space industry growing into a $1 trillion market, with some more optimistic forecasts suggesting that operational space activities, including inter-earth and moon ventures, could reach as high as $10 trillion by 2050.

No matter the hard financial figures, space stocks have a promising future. Three particular space stocks stand out, offering strong long-term prospects grounded in today’s reality, epitomizing the best of the space industry.

Lockheed Martin (LMT)

Lockheed Martin (NYSE:LMT), a key player in aerospace and defense, stands out as a stable and reliable investment in the space industry. At the same time, its broad defense portfolio shields it from market swings in the space sector like we’ve seen recently with AST Space Mobile’s (NASDAQ:ASTS) rough start to 2024. Instead, the large-cap space stock offers stability alongside continued aerospace upside.

Value and income investors will see great potential in Lockheed Martin. The company has consistently increased its dividend distributions for the last 21 years, creating a buzz that it will eventually achieve dividend aristocrat standing. Although its current yield is slightly below 3%, its 43.92% payout ratio shows the company has enough cash on hand to keep expanding into space while offering investors some cash flow.

In Lockheed Martin’s diverse operations, the space sector, though not the largest, is growing steadily. Recent quarterly reports show that space operations contribute about 20% of the company’s revenue. The company continues to expand its space technology presence, securing major contracts like the $1.5 billion satellite production deal with Northrop Grumman (NYSE:NOC) and a $890 million missile-tracking satellite deal, highlighting its growing success in the space sector.

Rocket Lab (RKLB)

Rocket Lab USA (NASDAQ:RKLB) closed 2023 on a high note as shares jumped nearly 20% in a single day before setting out to average a 10% gain over the past month. But what happened, and is the trend set to continue in 2024?

Following a slump to the $4 range after a flight failure, Rocket Lab USA bounced back big time with a new US government contract valued at $515 million. This agreement involved developing, deploying, and maintaining 18 space vehicles, and sent the small-cap space stock into the stratosphere.

Though RKLB isn’t yet ready to compete with SpaceX, this doesn’t mean the space stock doesn’t have a strong future ahead. This year’s queue is already full as the company’s booked 22 Electron missions for the year, with clients lining up for a spot on the exclusive list. This customer enthusiasm comes on the heels of multiple milestones in 2023. The company launched its 42nd rocket overall and its 10th in a single year, setting a new record for annual launches.

AST SpaceMobile (ASTS)

I mentioned earlier that, among space stocks, AST SpaceMobile (NASDAQ:ASTS) had a rough start to the year. Ongoing uncertainty concerning the company’s state of funding led to shares dipping nearly 15% since we rang in the new year. But that doesn’t mean this space stock is down for the count.

Remember, the number one enemy of Wall Street is uncertainty. The unknown element means analysts can’t model cash flows or effectively forecast valuation. And ASTS’ funding uncertainty created confusion that sent investors running. But there’s good news coming, as the company expects to “close and fund the previously disclosed strategic investment in January 2024 with multiple parties.” Once you see that sweet, sweet funding secured message, expect ASTS to go stratospheric.

Last year, the company, in collaboration with AT&T (NYSE:T), made the world’s first satellite-enabled 5G call using standard cell phones. While major firms like SpaceX focus on global Internet connectivity from space, AST SpaceMobile concentrates on a more immediate and critical need: providing dependable cell connectivity in remote and rural areas without the need for expensive satellite phones.

This market, consisting of potential consumers beyond the reach of traditional cell coverage, encompasses over 1 billion people. It represents a huge opportunity that AST SpaceMobile is actively pursuing as one of the few space-based cell providers racing to enter the market.

AST SpaceMobile is gearing up to launch its first five commercial satellites in 2024, which, alongside an anticipated funding announcement, could make ASTS the space stock of the year.

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.