When it comes to space launch, the more safety you want, the more money you can expect to pay.
United Launch Alliance, for example -- the joint venture between Boeing (BA 0.11%) and Lockheed Martin (LMT -0.13%) that has historically been NASA's favorite launch contractor -- has an unparalleled record of launch success, with 148 straight launches to orbit (through Jan. 22) ...
148-- Tory Bruno (@torybruno) January 22, 2022
... that went right where they were supposed to, "hot, straight, and normal."
Hot, straight, and normal-- Tory Bruno (@torybruno) January 21, 2022
Of course, maintaining such a record of reliability isn't cheap, which is why some ULA launches cost taxpayers as much as $400 million a pop (or they used to, until CEO Tory Bruno came to town and began taking a hatchet to costs to compete with SpaceX).
And yet, for customers willing to take a bit more risk, savings could be substantial -- or so NASA hopes.
More risk, less cost
In May 2021, NASA announced the creation of a "Venture Class" of space missions, in which America's space agency will try to find "new, small Launch Vehicles" that can lower NASA's cost of launching more "risk tolerant payloads." Since the rocket costs only a few million dollars, and the payload not much more than that, if they both blow up upon launch, this won't elicit too much crying at Houston. They'll just build them both again and try again.
At the time, NASA pointed to Astra Space's (ASTR -5.14%) tiny "Rocket 3," Virgin Orbit's (VORB) LauncherOne air-launched rocket, and Rocket Lab's (RKLB -2.68%) workhorse Electron rocket as among the vehicles it thought might be suitable for the Venture Class project.
Less than a year later, NASA has just confirmed that each of these rockets -- and several more besides -- do in fact fit the bill.
As the agency announced late last month, 12 separate companies, including both "established and emerging launch providers" and even "launch service aggregators and brokers" that don't actually own their own rockets, have all qualified to compete for a set of indefinite-delivery/indefinite-quantity government contracts that will be awarded over a five-year period -- and could deliver $300 million in revenue to the winners.
The 12 companies making NASA's short-list for these Venture-Class Acquisition of Dedicated and Rideshare, or "VADR," missions include privately held companies:
- ABL Space Systems (a start-up rocket maker that hasn't yet reached orbit -- but already has contracts to launch payloads for both Lockheed Martin, and for com, too).
- Blue Origin (that's Amazon CEO Jeff Bezos's space company).
- Phantom Space (founded by the same guy who used to run Vector Space Systems).
- L2 Solutions LLC.
- Relativity Space.
- Spaceflight Inc.
- And SpaceX.
And publicly traded companies, too:
- Astra Space.
- Northrop Grumman (NOC 0.55%).
- Rocket Lab.
- And Virgin Orbit.
Oh, and also United Launch Services, which, according to S&P Global Market Intelligence, is a subsidiary of ULA, and thus likewise co-owned by Boeing and Lockheed Martin. With these two companies added to the tally, VADR gives investors in no fewer than six separate publicly traded space stocks a chance to profit from NASA's latest space program.
Who's winning this race?
Which of these companies are most likely to win slices of NASA's $300 million VADR pie? Luckily for investors, I'd say the odds favor the publicly traded prospects -- Astra, Rocket Lab, Virgin Orbit, Northrop Grumman, and ULA's Boeing and Lockheed. Each of these companies has successfully put at least one rocket in orbit to date, and Rocket Lab, Northrop, Boeing, and Lockheed in particular have all sent up dozens of rockets.
Also likely front-runners are SpaceX (natch -- they're arguably bigger than ULA at this point) and Spaceflight -- which doesn't actually own any rockets, but has built a decent-sized business renting space aboard other companies' rockets to fulfill its contracts.
As for the other rocket companies, I wouldn't necessarily rule them out. ABL, Phantom, Relativity, and Blue Origin haven't actually achieved orbit -- yet. But if they survive long enough, all four have a decent shot at getting there. L2 could also win some contracts as a sort of space-freight forwarder like Spaceflight, although -- to be honest -- I feel Spaceflight kind of dominates this market niche.
And NASA has a real incentive to help out these space up-and-comers, too. In fact, probably the key takeaway for investors from all of the above is that space is getting more crowded, and price competition is going to get more fierce. This will lower the cost of space launch for NASA, and for taxpayers -- but it's also going to compress profit margins, and probably drive more than a few space companies out of business entirely.
Invest carefully, and don't be afraid to sell your losers once the winners become clear.