Ark Invest operates the largest actively managed exchange-traded fund in the world. It’s CEO and CIO, Catherine Wood, is considered this era’s Warren Buffett, and has led the firm’s flagship ETF — the Ark Innovation ETF (NYSE:ARKK) — to a whopping 170% return over the past year. So, when news broke that Wood and Ark Invest would be launching a new space exploration ETF under the ticker “ARKX,” space stocks naturally jumped.
And not by a little — by a whole bunch. This makes complete sense.
In the bigger picture, the new ARKX space exploration ETF is just one reason in an increasingly long list of reasons why space stocks are some of the best stocks to buy in 2021. Other reasons public investor interest in space will increase significantly include the following: a flurry of space company initial public offerings (IPOs) over the next 12 months, multiple successful flights from SpaceX and others drumming up mainstream enthusiasm, and technological advancements in 5G and AI unlocking new capabilities in this still very nascent industry.
Add it all up, and I think space stocks could have a “coming out party” in 2021, much like electric vehicle (EV) stocks did in 2020, wherein many EV stocks doubled, tripled and even quadrupled (or more) throughout the year. See: Tesla (NASDAQ:TSLA), Nio (NYSE:NIO) or Blink Charging (NASDAQ:BLNK).
Space stocks are positioned to do that in 2021.
With that in mind, let’s take a look at my three favorite space stocks to buy this year:
Space Stocks to Buy: Virgin Galactic (SPCE)
The first name on this list of space stocks to buy in 2021 is commercial spaceflight leader Virgin Galactic.
You may have heard of Virgin Galactic as one of the leading companies behind commercializing space tourism, e.g. flying rich clients into space. Demand for such a service is very clearly robust, since wealthy folks like to “do it all,” and space is the one thing that no one — excluding a handful of astronauts — has been able to do yet.
The only question here, then, is supply. Can Virgin Galactic actually build a safe, operable commercial spaceflight service to supply all that demand?
It increasingly appears that the answer is “yes.” The company staged multiple successful test flights in 2020, and even though it’s most recent test-flight triggered a “fail-safe” scenario, the pilots and spacecraft executed flawlessly in that fail-safe scenario.
Management continues to tout 2021 as the year that they will fly the company’s Chairman, Richard Branson, into space. I think this is totally doable. If that does happen, it will be a huge step forward in Virgin Galactic turning its commercial spaceflight vision into a reality.
Once that space tourism business scales, it could be a multi-billion-dollar revenue business with hundreds of millions of dollars — and maybe even close to a billion dollars — in profits. That’s enough growth potential to make SPCE stock a great long-term investment.
Maxar Technologies (MAXR)
Second on this list of space stocks to buy in 2021 in Maxar Technologies. The bull thesis on MAXR stock breaks down into three parts:
First, Maxar is an industry veteran that’s been around since Neil Armstrong landed on the moon. That means the company has a ton of expertise in all things space related. And sports robust space infrastructure production capacity and a huge existing satellite network that is already rotating the Earth. The company will rely heavily on these incumbent advantages to grow with the booming space industry over the next 10 years.
Second, the company is better now than ever before. That is, a few years back, Maxar was a heavily indebted company spread too thinly across too many projects. Ultimately, this caused the company to lose a big satellite in early 2019. But, over the past 12 months, Maxar has down-sized its operations, paid down debt and focused the business model around its strengths: Earth Intelligence and Space Infrastructure.
Third, huge investment into 5G and autonomous driving technology will propel big demand for Maxar’s space-tech solutions over the next few years. On the 5G front, Maxar’s Space Infrastructure business will get a big boost as companies pour money into building out non-terrestrial 5G networks. Meanwhile, autonomous driving technology requires granular, 30-centimeter imaging data — the likes of which only Maxar can produce thanks to its existing constellation of imaging satellites. Demand for this granular imaging data will explode higher over the next decade.
Net net, MAXR stock is a solid, well-established and well-rounded play on the burgeoning Space Economy.
Last, but not least, on this list of space stocks to buy in 2021 is Momentus, which is coming public via special purpose acquisition company (SPAC) Stable Road (NASDAQ:SRAC).
I like to think of Momentus as a space mobility company. It builds what are called “transfer vehicles,” which enable devices to move throughout space. These transfer vehicles help satellites — once detached from the main rocket — get into their final destination orbits, switch between orbits and return to a spaceship.
Momentus is essentially building the technology upon which things move in space — and they are the best in the world at doing this.
Its transfer vehicles are built on the back of a patented and proprietary water plasma propulsion technology platform that is the cheapest and most efficient mechanism for maneuvering in space. This innovative propulsion platform is highly scalable (engine efficiency increases with size), throttleable (you can vary thrust to optimize trip time), safe (it’s based on water, which is as low-risk as it gets), and cost-effective (it’s built on a simple design that uses low-cost, off-the-shelf components).
Thanks to this breakthrough tech, Momentus has been tapped by SpaceX as its transfer vehicle supplier. That’s a big deal. But it’s also just the beginning. Because in the long run, Momentus has an opportunity to emerge as a foundational technology platform for space mobility.
Naturally, SRAC stock has huge upside potential as the Space Economy comes to life in the 2020s.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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