The space industry has seen rapid growth recently and continues to have a strong long-term expansion outlook. Investing in rocket stocks could be a way for investors to profit from the trend. Rocket stocks are equities that represent ownership positions in companies that design or manufacture rockets and related support technologies. While there are publicly traded companies with decades of experience in rocketry, a rise in pure-play rocket and space-technology companies has also emerged, aiming to meet the new demand for commercial and defense-related launches.
Best rocket stocks to buy now
1. Rocket Lab
NASDAQ: RKLB
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2. Lockheed Martin
NYSE: LMT
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Lockheed Martin (LMT -0.21%) has been a leader of the U.S. aerospace and defense industry for decades. The company provides technologies and services to the U.S. Department of Defense and NASA, in addition to agencies from other governments around the world. The company's space segment is one of its four major divisions. For investors seeking diversified, well-established aerospace plays with exposure to growth in the rocket industry, Lockheed Martin could be a good portfolio addition.
The company has supported all 22 of NASA's Mars missions, and it's poised to play a major role in the agency's next big space exploration moves. Lockheed is the primary builder of NASA's Orion spacecraft for space exploration and a key contractor in the Artemis program to build facilities on the surface of the moon in preparation for travel to Mars.
Lockheed has been contracted to help build at least six of the Orion spacecraft and could wind up producing as many as 12 of the craft for NASA. The company is also designing the first rocket to ever be launched from the surface of Mars. Lockheed Martin's diversified leadership across multiple segments of the defense and aerospace industry makes its stock a good pick for investors seeking relatively low-risk plays in the rocket industry.
3. L3Harris Technologies
NYSE: LHX
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L3Harris Technologies (LHX +0.95%) is an aerospace and defense company that has played a role in nearly every major U.S. space and missile program. The company designs and manufactures engines and other related components that make rocket launches possible. It also manufactures hypersonic propulsion systems and solid rocket engines that are used in missile systems. In addition to rocket-related technologies, L3Harris also operates in the communications-systems-technologies and integrated-mission-systems categories.
In 2023, the company completed its acquisition of Aerojet Rocketdyne -- a move that further strengthened its position in the rocketry industry. Aerojet now operates as a business segment within L3Harris and develops rocket propulsion and energetics technologies, and it's currently working on projects including providing engines and other propulsion technologies for the Space Launch System (SLS) and Orion spacecraft as part of the U.S.'s Artemis program.
4. Voyager Technologies
NYSE: VOYG
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Investing in rocket stocks
The commercialization of space appears to be a trend that is still in the very early stages. Investing in rocket stocks could be a good way for investors to gain exposure to potentially massive growth opportunities. Between growth for satellite-based internet and communications services for the consumer market and rising defense-related applications, the space industry looks poised to continue expanding rapidly. With a promising outlook for satellite launches, space-station construction, and maintenance, there is a promising demand picture for rocket-launch services and related technologies over the next decade and beyond.
Investing in individual industrial stocks with strengths in rocket technologies could allow investors to profit from space commercialization trends. Investors can also gain broad-based exposure to the space industry by investing in industrial ETFs.
Risks of investing in rocket stocks
While space-commercialization trends suggest that rocket stocks could deliver strong returns over the long term, investing in these companies and related ETFs is still risky. Sales and earnings performance and growth outlooks will shape valuations for stocks in the category. Share prices could tumble if business results come in below expectations.
Macroeconomic dynamics and investment cycles among customers in both the public and private sectors could also lead to valuation downturns. Different types of rocket stocks also come with distinct types of risk factors.
Younger companies with highly growth-dependent valuations are at risk of potentially massive valuation contractions if lofty expectations for future sales and earnings growth fail to materialize. Many of these companies are pure plays in the rocket-technologies space and do not have other business segments that can strengthen results if performance in the category comes in softer than expected.
Established players in the space also face risks of significant valuation contractions if sales and earnings miss targets -- but their financial results tend to be more stable and predictable. On the other hand, these larger and more established companies are at risk of potential disruption from new entrants into the market. These larger companies are also more diversified. Still, they could wind up seeing weak results due to the performance of other segments, even if their rocket-focused units are putting up strong numbers.
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Factors to consider before investing in rocket stocks
Investors should consider their personal risk tolerance and anticipated returns before buying rocket stocks. For those willing to take on high levels of risk in pursuit of potentially explosive growth, investing in smaller, pure-play companies may align better with that goal. Alternatively, investors who are looking to minimize their exposure to downside volatility could be better served by backing time-tested and diversified players in the category.
When evaluating individual stocks, investors should also be looking at metrics such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-earnings growth (PEG) ratios. Evaluating a company's recent contract wins, product pipeline, and relationships with key customers is also important.
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