Investing in space is no longer a moonshot.
With the recent launch of four astronauts aboard a SpaceX spacecraft, and another five crewed missions scheduled over the coming months, space exploration has entered a new era. Rocketing out of our atmosphere used to be the sole domain of government agencies like NASA, but these days commercial enterprises are getting in on the action — and investors are, too. It’s still in the early innings, but the promise of profits among the stars is something that every investor should keep on their radar. While there are only a handful of options — with explosive growth on the horizon — what follows are some of the best space companies to invest in now.
Aerojet Rocketdyne (ticker: AJRD)
Getting into space is the hard part, but Aerojet Rocketdyne makes it easy. As the company’s name implies, Aerojet Rocketdyne makes rockets — the kind that NASA straps onto spaceships and sends hurtling skyward. In fact, Aerojet Rocketdyne is making the most powerful rocket NASA has ever built: the Space Launch System (SLS), which is designed to take humans further into space than ever before. While hopes are sky-high for Aerojet Rocketdyne’s potential profits from the SLS and subsequent endeavors, the company derives the majority of its profits from aerospace and defense contracts, like those for its for guided missile systems and ballistic missiles. Business has been booming, with 10% sales growth and an impressive 49% increase in its backlog during the third quarter. Aerojet Rocketdyne may be powering the future of spaceflight, but in the here and now, the company makes for an excellent investment.
Northrop Grumman Corp. (NOC)
Northrop Grumman partakes in all of the standard space business you’d expect from a defense contractor with a $51 billion market cap, including building launch boosters for NASA programs and earning a $13.3 billion Air Force contract for an intercontinental ballistic missile system. But a newer development this year was the success of the company’s Mission Extension Vehicle (MEV), which refuels satellites in space and returns them to operational status — an excellent way for Northrop Grumman to bill itself as a provider of essential, life-extending services to other space-faring companies. In its third-quarter earnings announcement, Space Systems took center stage, providing a 17% year-over-year boost in sales and a 17% increase in operating income, and Northrop Grumman sees more growth on the horizon. Investors looking for a stable, well-established space company to invest in should look no further than Northrop Grumman.
Nokia Corp. (NOK)
Nokia is heading to the moon, though not until 2022. In late October, the company announced it had landed a contract with NASA to “build and deploy the first ultra-compact, low-power, space-hardened, end-to-end LTE solution on the lunar surface in late 2022.” The idea is for Nokia to establish a 4G cellular network in order to facilitate communications among astronauts on the moon as part of NASA’s Artemis program — the goal of which is to land another astronaut on the moon by 2024. The contract is only worth $14 million, and in the short term, Nokia has to contend with problems here on Earth, such as a 7% decline in sales during the third quarter. But in the long term, being the first company to provide cell service on the moon could be an incredible growth — and branding — opportunity.
Virgin Galactic Holdings (SPCE)
For the modest price of $250,000, your dreams of exploring the stars can come true, courtesy of Virgin Galactic. Founded by Sir Richard Branson, the idea behind Virgin Galactic is simple: provide space tourists with a ride beyond the atmosphere. Unfortunately, that’s easier said than done, especially during a pandemic. In mid-November, the company announced it had to postpone a test flight out of its New Mexico-based Spaceport due to new virus-related restrictions. Without more tests, Virgin Galactic will have to continue to delay sending paying customers into space, and the test flight was supposed to contain a NASA payload that would’ve brought the company a nice payday. Virgin Galactic still has $742 million in cash as of the third quarter, and it still hopes to put passengers into space by 2021. That said, at this point, while Virgin Galactic is one of the best space stocks to watch, it’s still a moonshot.
Procure Space ETF (UFO)
Space is a pretty big place, and there’s plenty of room for investing in all sorts of space-related companies. If you don’t want to bet your money on a single company winning the space race, the Procure Space ETF may be your best bet. Procure Space invests 80% of the fund into companies that derive “at least 50% of their revenue or profits from one or more segments of the space industry” — in other words, it’s not just an exchange-traded fund filled to the brim with defense contractors and aerospace companies. As such, a large chunk (41.7%) of the fund is dedicated to the communications services sector — companies with satellites in space — while the rest is divided among industrials (35.4%), information technology (17.5%), consumer discretionary (4.7%) and materials (0.7%). The Procure Space ETF casts a wide net, allowing investors to hedge their bets on which space companies will win in this growing market.
SPDR S&P Kensho Final Frontiers ETF (ROKT)
Exploring the final frontier is going to take more than one company, and the Final Frontiers ETF is built to help investors spread their money out over a collection of companies heading for the stars. The majority of the fund is focused on the aerospace and defense sector, accounting for about 65% of the fund’s holdings. Some of the top stocks in the fund include industry heavyweights such as Maxar Technologies (MAXR), Honeywell International (HON) and Lockheed Martin Corp. (LMT). The Final Frontiers ETF is a surprisingly down to earth way of investing in space — the fund’s investments are stable companies whose fortunes aren’t predicated on reaching the stars, and as such may be more suitable for investors who want to keep their feet on the ground while investing in space.
Iridium Communications (IRDM)
Sending a spacecraft back to the lunar surface is an admirable goal, but there are plenty of profits to be made by companies closer to home. Iridium Communications is one such company, with a network of 66 low-Earth orbiting satellites providing subscribers with voice and data connectivity all over the globe. Last year, the company completely overhauled its fleet of satellites in order to improve its services, and Iridium is already reaping the rewards: total revenue increased 5% in the third quarter thanks to a record 67,000 new subscribers in the second quarter. Iridium is particularly well-positioned to profit from the internet of things (IoT), and growth in commercial IoT customers helped push the company’s billable subscriber count up 13% year over year. All told, Iridium’s presence in space is helping it profit down here on Earth, and investors may want to get in now before shares really take off.
Seven top space stocks and ETFs to watch:
— Aerojet Rocketdyne (AJRD)
— Northrop Grumman Corp. (NOC)
— Nokia Corp. (NOK)
— Virgin Galactic Holdings (SPCE)
— Procure Space ETF (UFO)
— SPDR S&P Kensho Final Frontiers ETF (ROKT)
— Iridium Communications (IRDM)
