Thanks to interest from a number of eccentric billionaires -- namely, Tesla (NASDAQ:TSLA) and SpaceX's Elon Musk, Amazon's (NASDAQ:AMZN), and Virgin Group founder Sir Richard Branson -- the nascent commercial space industry has received quite a bit of media buzz. From satellite-based high-speed internet to mainstream space travel to a native colony inhabiting Mars, the ambitions are nothing short of visionary, albeit very long-term.
For all of the attention, though, investing in the final frontier is a tricky proposition. Though expectations are that current global spending of about $360 billion will increase some 5% or so a year for the foreseeable future, large swaths of the industry are tied up with government contractors like Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC), or inaccessible to average investors via private space start-ups.
One quick and easy way to get started would be using the Procure Space ETF (NYSEMKT:UFO), just launched in the spring of 2019. If the small and untested fund isn't going to cut it for you, though, here are three ideas for investing in space in 2020.
Space communication gets some renewed interest
One of the oldest plays in the industry playbook is space-based communications. Satellites aren't exactly new technology, but new developments in the telecom and satcom industry are opening up new doors for some legacy firms.
First up in the conversation is Intelsat (NYSE:I), the largest satellite services company in the world. Intelsat provides critical functions around the globe for media, mobile network, and internet companies, not to mention government entities. However, revenues ($2.09 billion over the last 12 months) have been flat and trending slightly down for years, and the satellite operator is burdened with a whopping $14.5 billion in debt.
Shares have been a wild ride recently, though, surging from penny stock status to over $20 a share on news that the Intelsat-backed C-Band Alliance had proposed a private auction of its C-band spectrum to repurpose it for 5G mobile and internet use. There has been back-and-forth, however, as it remains to be seen if the auction will actually end up being public via the Federal Communications Commission, with proceeds from the sale headed to U.S. Treasury Coffers. Intelsat stock has subsequently fallen back under $8 a share, but optimism remains that the C-band sale could provide a much-needed cash infusion for the satcom. The stock is thus worth a look -- albeit a speculative one.
In other news, Iridium Communications (NASDAQ:IRDM) continues to make progress adding subscribers to the next-gen satellite constellation it completed in 2019. Besides providing voice, data, and Internet of Things capabilities to businesses and government entities, Iridium is setting up new safety services for the maritime industry and rolling out a new air traffic control system based on its new in-orbit satellites. The stock more than doubled in value in 2018 and 2019, but the promise of slow-and-steady new customer additions in the years ahead could make this one of the more stable ways to bet on space communications.
A restructured space constructor
NASA is planning to get astronauts back to the moon by 2024 via Project Artemis, and the contracts to be doled out to help the space agency meet its goals could be lucrative. One firm that is in the running is Maxar Technologies (NYSE:MAXR).
First off, it needs to be acknowledged that the space components maker is in a bit of a financial mess. The $2.0 billion in revenue over the last year has generated negative free cash flow (what's left after cash operating and capital expenses are paid) of $38 million. Maxar also has ample debt on the books of $3.1 billion.
That is about to change, though. Maxar recently announced it is selling its space robotics division MDA to a consortium of private investors for $765 million. Maxar will lose about $375 million in annual sales when MDA is offloaded, but the deal also includes the offloading of some of its debt as management said it will reduce total liabilities by over $1 billion. That cleans things up for Maxar considerably.
Of course, much is now riding on the company's NASA contracts for Project Artemis. Shares recently ran higher on the MDA deal, so I'm not a proponent of making a purchase just yet. However, the company is worth watching in the quarters ahead, especially if it can start gaining some positive traction on the bottom line.
Taking non-astronauts into orbit
Perhaps the best way to invest in space in the years ahead -- at least if you ask analysts at Morgan Stanley (NYSE:MS) -- is Virgin Group spinoff Virgin Galactic (NYSE:SPCE). The company made its public debut in the autumn of 2019, and subsequently reported it lost $138 million on $3.25 million in revenue during the first nine months of the year.
However, the company is readying its "space tourism" operation at Spaceport America in the New Mexico desert, eyeing its first commercial launch sometime in 2020. All seats for the first launch that were selling for $250k a pop have been reserved, but more flights are being planned. More than just a vacation for the super-rich, Galactic's plan is to use its phase one tourism package to develop hypersonic commercial flights.
And that's what has Morgan Stanley so excited, as it thinks the space-based commercial travel market could be worth $800 billion in a couple of decades. To be sure, this is a highly speculative play on a space start-up for the ultra-long haul. Besides reservation deposits, Galactic doesn't generate much in the way of revenue, and its $85.5 million in cash at the end of the third quarter will dry up fast if the current rate of losses continues. However, the company has been receiving plenty of investment interest thus far, scooping up funding from the likes of Boeing and getting government support from government entities like the state of New Mexico.
No matter which way you choose to invest -- if at all -- bear in mind that the space investment universe is small and highly volatile. Nevertheless, with advances in technology and interest in the possibilities on the rise, the final frontier could be a very large and viable portion of the global economy in a few decades' time. I'd just advise keeping any positions small.