Space has held great potential ever since man landed on the moon in 1969 and America emerged victorious in the space race. Though things have been tepid in the late 90’s, in the last decade, decline in manufacturing costs, injection of private funding, technological advancements and growing interest of public companies have given a new life to space exploration. In fact, commercialization of space in this decade and ahead is expected to create a ‘multi-trillion-dollar space economy’ and also a mega trend for investors willing to take risk. Per a Morgan Stanley report, the global space industry could surge to more than $1 trillion by 2040.
Race to Space Continues
Here are the reasons behind the boom in space economy. Firstly, technology has been a hurdle that dampened man’s interest in space exploration. However, in recent years, advancements in propulsion technology, nanotechnology, and artificial intelligence (AI) have opened up space like never before. Secondly, decline in cost for space travel, which can be linked to technological advancement. Last, but the least is existential crises that the human race is facing, from overpopulation to resource depletion and climate change. In fact, researchers believe that commercializing space and colonizing will give humans more space and resources, and in turn, help in reversing the climate change.
Last year, the National Aeronautics and Space Administration (“NASA”) sent astronauts to the International Space Station (“ISS”) for the first time since 2011. Also, private companies like SpaceX launched a record-breaking 26 space missions, an endeavor to test flights for commercializing Earth’s lower orbital programs and delivering packages to the ISS. Virgin Galactic Holdings, Inc. SPCE, a space tourism company has completed the first two successful glide flights with its SpaceShipTwo spacecraft.
Why will the momentum continue in 2021? Firstly, satellite imaging market is booming as the demand for landscape and terrain data for autonomous vehicles has witnessed drastic growth, thanks to the advancement of the self-driving era. Additionally, communication companies are putting in millions of dollars to provide high-speed connectivity in remote locations across the globe. The Biden administration is also lending support to the space economy’s growth. President Joe Biden has embraced two of Trump’s signature initiatives, the Artemis program, which is NASA’s effort to return astronauts to Moon, and the sixth branch of the armed services, Space Force. Hence, NASA can move ahead with major deep-space human exploration that includes plans to land astronauts on the moon by 2024.
IPOs Boosting the Space
Initial public offering and mergers continue to boost the space industry. On Mar 25, Genesis Park Acquisition, a special purpose acquisition company, merged with Redwire, a space infrastructure provider. The merger facilitates Redwire to continue its technological development and join others in the pure-play space economy. Earlier Genesis Park Acquisition raised $166 million in its IPO in November 2020.
What’s more? Ark Investment Management launched the ARK Space Exploration & Innovation ETF (ARKX) on Mar 30, a space-themed ETF that invests at least 80% of its assets in domestic and foreign companies that is involved in space exploration. The ETF has 39 pure-play space companies like Iridium and Virgin Galactic.
4 Top Stock Choices
The space industry continues to boom as humans keep wondering what exists trillions of miles away and look for a chance to take part in space tourism. According to a Research and Markets report, the space Industry, was valued at $360 billion in 2018, and is projected to witness a CAGR of 5.6%, to reach $558 billion by 2026. The demand for nano-satellites and re-usable launch vehicle systems continues to drive the growth, especially in the United States that is emerging as the largest shareholder of the total global expenditure. Here are four stocks to tap in the booming space economy. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Raytheon Technologies Corporation RTX is an aerospace and defense company. The company designs products for defense and commercial space operations. Raytheon also designs, produces, and supports cabin interior, communications and aviation systems, oxygen systems, food and beverage preparation, storage and galley systems, and lavatory and wastewater management systems and more.
The company’s expected earnings growth rate for the current year is 32.2% against the Zacks Aerospace – Defense Equipment industry’s projected decline of 3.1%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 0.8% upward over the past 60 days.
Teledyne Technologies Incorporated TDY provides instrumentation, digital imaging, aerospace and defense electronics, and engineered systems. The company’s sensors will power, sense and help analyze the chemical composition of the surface and minerals during the Mars 2020 mission. Teledyne’s expected earnings growth rate for the current year is 7.8% against the Zacks Aerospace – Defense Equipment industry’s projected decline of 3.1%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 0.4% upward over the past 60 days.
Maxar Technologies Inc. MAXR provides earth intelligence and space infrastructure solutions. Also, it offers geospatial information, application, and analytic services. The company’s expected earnings growth rate for the current quarter is more than 100% against the Zacks Satellite and Communication industry’s projected decline of more than 100%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised more than 100% upward over the past 60 days.
NVIDIA Corporation NVDA operates as a visual computing company. AI is accelerating space exploration and NVIDIA leads the frontier. Using 120 GB noisy biosensor data collected from NASA analog missions, teams can train AI models to simulate various medical conditions, and quickly counter effects. The company’s expected earnings growth rate for the current year is 33.7% compared with the Zacks Semiconductor – General industry’s projected earnings growth of 27%. The Zacks Consensus Estimate for this company’s current-year earnings has been revised 15.1% upward over the past 60 days.
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