Current market challenges continue to drive down share prices in key areas, including in growth stocks and speculative investments in future technology. Morgan Stanley anticipates revenues from space-faring industries to reach or exceed $1 trillion by 2040.
Major players including Maxar Technologies (MAXR) Rocket Lab USA (RKLB 3.29%), and Virgin Galactic Holdings (SPCE 3.15%) plan on getting their piece of that stellar revenue total. These three publicly traded companies may well offer exceptional long-term value to investors able to buy on the dip as they seek to reach lasting profitability in the ongoing space race.
1. Maxar: Choosing the eye in the sky
Maxar Technologies doesn't just build the global intelligence satellites the Pentagon and Google Maps from Alphabet rely on -- it also operates them and provides intelligence. This company offers a strong position in two key sectors likely to grow along with the space industry as a whole. This combination puts them a step ahead of many would-be competitors in the space.
The satellite company's share prices increased on instability in and around Russia this year, giving it a temporary boost. But that proved short-lived, and share prices now sit near the S&P 500 average at around 20% down over the past year. Still, the company financials remain strong, with many major projects underway and operating cash flows in excess of $300 million with $341 million of liquidity available.
The company currently sits at a market cap of $2 billion, with quarterly revenues exceeding $438 million as of the second quarter of 2022. Morgan Stanley also noted that launch costs could decrease by as much as 90% in the next few decades, reducing much of Maxar's deployment expenses.
2. Rocket Lab: Space delivery in the long term
Rocket Lab sits at the fore when it comes to such launches, with its reusable rocketry giving it a serious edge in satellite deployment. Investors looking for a space trucking company with the ability to get goods of almost any size where they need to go can likely find it with Rocket Lab.
As space logistics develop, satellites no longer simply require launching. They need precise positioning and potential relocation over time. Rocket Lab offers rockets for launch, individual spacecraft for positioning, and additional proprietary systems unavailable from similar deployment sources. The company recently celebrated its 31st launch with its Electron small-payload reusable rocket system, delivering 151 satellites since its inception.
Prices of Rocket Lab shares slipped more than those of Maxar in the past year. The company has seen a dip of 60% over the past 12 months, despite Deutsche Bank revising price targets upwards to $15 earlier this year, much higher than the rocket company's current $5 share price. As costs to deploy go down, so should profitability from increasing sales go up. Revenue increased by 392% year over year, as of its second-quarter earnings report. Reusable rocketry remains at the heart of driving down costs of deployment, and that's where Rocket Lab shines.
3. Virgin Galactic: A bet on space tourism
Virgin Galactic may seem an old name in the relatively new interstellar travel space, but that longevity demonstrates that the company can withstand the trials and tribulations required to create an entirely new branch of tourism. The other part of the equation remains cash-equivalent holdings of $1.1 billion to help get it through as it strives to create a system for revenue generation. The company expects its first commercial flights in 2023, with the second-quarter earnings report indicating a second-quarter expectation for the launch, and when tourist embarkations begin, so too will revenue.
The fact that no real revenue generation currently exists for Richard Branson's space tourism company sits at the heart of its low share prices, even if bookings continue to accrue apace. This company experienced the largest dip on the list so far, falling from over $20 a share to $5 and below, and with new lows upwards of 75% share price loss on the year.
It may seem hard to envision space tourism in a time when recession looms, but the company's continued investment in new mothership builds and all the tools needed to get citizens on tour out of orbit offers a heartening look. The suppressed share pricing of today may look very good indeed in a few years when tourists travel among the stars (or at least in low earth orbit), and this highly speculative stock may well either prove a big winner or a slow burn over time.
Diversity remains key for smart space investment
Potential challenges to space industry development definitely include the situation on the ground. Recovering from a global pandemic and the fallout of potential recession, both in the United States and around the world, the markets appear more volatile than ever. Space investment may seem optimistic when news at home remains less so, but this dip may provide savvy investors a chance to get in on major companies before their sheets go from red to black and their profitability proves out.
These three top space stocks represent excellent examples of those hit hard by the dip that remain strong financially and have a chance at exceptional returns. As always, buying and holding for years offers a strong financial position, and diversification can help hedge bets in volatile markets and uncertain futures.
