Space is tough, but these 3 space stocks can reach orbit

Shareholders of Astra Space (NASDAQ: ASTR) received a reminder last week that space is difficult.

The company, which went public earlier this year through a merger with a special purpose acquisition company, or SPAC, saw a test launch of its new rocket below expectations after the failure of one of the five main engines powering the rocket. The stock fell more than 20% on the first day of trading after the incident.

Space has been a hot sector among investors, in part thanks to analyst estimates that it could represent a $ 1 trillion opportunity by 2040. But as Astra’s experience shows, few rocket companies are going straight out. Space operations carry substantial risks, and it is possible that not all state-owned companies that venture into space today will reach their destination.

For investors willing to brave the unknown and explore this new frontier, here’s why three Motley Fool contributors believe L3 Harris (NYSE: LHX), Galactic Virgo Holdings (NYSE: SPCE), and Rocket Labs United States (NASDAQ: RKLB) enjoy today’s space race.

Go for a proven entity with many ways to earn

Lou whiteman (L3 Harris): L3 Harris is not as glamorous a choice as some of the new space-focused companies. But it offers a strong exposure to the cosmos with much less risk of losing everything.

L3 Harris is the country’s newest defense prime contractor, formed by the 2019 merger of Harris and L3 Technologies. These two companies focused on electronics and communications, and together they have a formidable portfolio of space offerings. The company does not manufacture the powerful rockets needed to exit Earth’s atmosphere, but it does manufacture a range of antennas, transmitters, power modules and other electronic components for use in satellites.

The company’s space and airborne division, which includes not only extraterrestrial work but also components for warplanes, accounted for around 27% of total revenue in the first half of 2021. In the last quarter, L3 Harris space increased its revenue by 10%, capturing ranked scholarships totaling over $ 300 million. CEO Chris Kubasik said during the company’s second quarter earnings call that the company has a three-year space pipeline of “nearly $ 20 billion.”

In L3 Harris, investors get a growing space business backed by a wide array of defense electronics, communications and avionics assets. The company pays a dividend yield of 1.75% and management expects to spend more than $ 3 billion on share buybacks in the coming quarters.

L3 Harris seems in a good position to gain altitude from here.

The future of space is tourism

Rich Duprey (Galactic Virgo): Going into space is for risk takers and adventurers, and while investors need to be a lot more careful with the companies they invest their money in, I still love Virgin Galactic precisely for its derring-do.

I’ll say right off the bat that if Virgin’s claims of deliberately brushing aside security considerations just to pass an arbitrary deadline are true, then that’s unacceptable. Especially when you go to space, the risks are already great, and ignoring security protocols can only exacerbate them with potentially devastating impact.

Having said that, I think the doubts expressed about Virgin are weighing on its shares, and it gives investors the opportunity to buy just as it is about to begin trading.

Later this month, Virgin’s VSS Unity will undertake its first commercial and human research mission by transporting three paid crew members from the Italian Air Force and the National Research Council to assess the effects of the transition from gravity to microgravity on the human body.

Following the mission, Virgin will modernize the mother ship Eve, then begin commercial service at the end of next year. It has already enrolled 600 people paying $ 250,000 or more each for the opportunity to participate in the launch of the space tourism industry.

While missions for NASA and other commercial ventures have been the basic motivation for private space travel, it is the tourism aspect of it that sparks the imagination and brings the rocket down to the human level. Virgin Galactic is the vehicle through which investors can participate.

Analysts envision a potential future demand of $ 120 billion for the rocketeer, which could turn into some $ 1.7 billion in revenue by 2030 for Virgin, although it will admittedly have to overcome big hurdles to reach it. ‘altitude. Some analysts are concerned that the Federal Aviation Administration may interfere with its flight path, and my colleague Rich Smith, who is now proposing a different space stock, doubts that Virgin can actually achieve such high estimates.

It is this adventurous and risky nature of founder Richard Branson that suggests to me that it is more than possible. And while it may take a bit of a leap of faith to believe it can make it happen, I think Virgin has the potential to grow in their valuation.

This company is the leader of the small space race

Rich Smith (Rocket Lab): My favorite “new space” stock is Rocket Lab, a small rocket company and a recent IPO from PSPC.

“New” or not, Rocket Lab has been putting satellites into orbit for some time now. In fact, since May 2017, it has launched 21 separate and successful missions and has put more than 100 satellites into orbit for US commercial clients and government agencies, including NASA and the US Space Force.

And small or not, Rocket Lab is big enough to have recently won a contract with NASA to send two spacecraft not only into Earth orbit, but to Mars. In 2024, two Rocket Lab Photon spacecraft will travel to the Red Planet to conduct environmental investigations into the effects of the solar wind on the Martian atmosphere. The company even intends to send a spaceship to Venus at its own expense.

I admit, despite the theft manifests and future plans, the inventory remains something of an unknown quantity. Most financial data providers don’t even have an accurate reading of the company’s market capitalization, let alone estimates of future sales and profits.

But with a solid record of success, an established customer base for its Electron rocket, and plans underway to build an even larger rocket (the Neutron, which is expected to have 27 times the payload capacity of the Electron), at all. least, I can say that Rocket Lab seems to be going in the right direction: sharp end.