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Why Space Stocks Fell Out of the Sky Today

By Rich Smith - Mar 11, 2020 at 7:27PM

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Coronavirus ... in space?

What happened

The World Health Organization says it's official, now: Coronavirus is a pandemic.  

But can you catch COVID-19 in space? You'd almost think that was possible, from investors' reaction to the latest developments on the novel coronavirus outbreak today. Not only are earthbound stocks collapsing left and right, but four major players in space are also down significantly. By the closing bell, shares of satellite communications company Iridium (IRDM 5.30%) fell 8.6%, after being down close to 10% earlier in the day. Intelsat (INTE.Q) -- of "C-band alliance" fame -- fell 11%. Space tourism start-up Virgin Galactic (SPCE 6.44%) dropped 10.8%. And space robotics specialist Maxar Technologies (MAXR 3.02%) fell right out of the sky -- down 16.9%.

Red stock arrow breaking up and showering down in pieces over a city below

Image source: Getty Images.

So what

How does any of that make sense?

Actually, it kind of does make sense when you consider that at this point in the development of the space economy, space companies only really make economic sense to the extent that they facilitate doing business here on Earth. Iridium and Intelsat wouldn't have businesses at all, but for the fact that people and companies need to communicate with each other on the ground. If a recession takes hold "down here," therefore, it's going to affect their fortunes "up there."

Maxar Technologies' various businesses, too, are all tied to Earth. Every satellite or spacecraft Maxar builds, after all, launches from Earth initially. Even the satellite repair robots that Maxar has been designing for NASA and DARPA won't find much of a market if the satellite companies Maxar works for go belly-up.

And Virgin Galactic, once it begins operations, will need to entice coronavirus-wary travelers to cram themselves into tiny spaceplanes and sit next to each other on two-hour flights to space and back. As we can infer from the performance of the cruise industry and airline stocks lately, that may be no easy task.

Now what

But there's good news to report in space, too, especially from the perspective of an investor focusing on small caps and tech start-ups -- and on the eventual IPOs of currently private companies.

As Jim Cantrell, recent CEO of now-defunct space start-up Vector Space, has observed, recessions -- and we do appear to be heading for one now -- can be great times for investors focused on start-up companies. Recessions have a tendency to clear out the deadwood of companies that weren't going to make it anyway, making it easier to identify the survivors. As long-term investors, those survivors are the companies we want to own for the long term. So even in the midst of sell-offs like the one we're seeing today -- smile.

The market may just be making it a bit easier for you to identify the winners -- and making them a bit cheaper to buy, to boot.

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Stocks Mentioned

Iridium Communications Inc. Stock Quote
Iridium Communications Inc.
$38.71 (5.30%) $1.95
Intelsat S.A. Stock Quote
Intelsat S.A.
Maxar Technologies Stock Quote
Maxar Technologies
$30.69 (3.02%) $0.90
Virgin Galactic Holdings, Inc. Stock Quote
Virgin Galactic Holdings, Inc.
$7.11 (6.44%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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