Investing in Space

The space industry offers investors exposure to one of the fastest-growing sectors of the economy. From satellite operators to launch providers, numerous public companies provide access to space-related revenue streams. This guide covers the major investment options, market dynamics, and considerations for space investors.

Market Overview

The global space economy exceeded $500 billion in 2024, with projections reaching $1 trillion or more by 2040. Investment in space companies has grown significantly, though the 2021-2022 SPAC boom and subsequent correction provided lessons about valuation and timing.

Key market segments include:

• Satellite communications: Largest revenue segment, including broadband, TV, and mobile
• Earth observation: Fast-growing segment driven by data analytics
• Launch services: Enabling infrastructure with improving economics
• Navigation/positioning: GPS-dependent services and applications
• Space infrastructure: Manufacturing, servicing, and stations
• Government/defense: National security and exploration programs

Pure-Play Space Companies

"Pure-play" space companies derive most or all revenue from space-related activities. These offer direct exposure to space industry growth but often carry higher volatility and risk.

Market cap data approximate and subject to change.

Notable Pure-Play Profiles

Rocket Lab (RKLB)

Rocket Lab is the second most prolific commercial launch provider after SpaceX. The company operates the Electron small launch vehicle and is developing the medium-lift Neutron rocket. Rocket Lab also manufactures spacecraft and components, diversifying revenue beyond launch services. The stock has shown significant growth as the company executes on its expansion strategy.

AST SpaceMobile (ASTS)

AST SpaceMobile is developing direct-to-smartphone satellite connectivity. The company's BlueBird satellites feature massive phased arrays capable of connecting to unmodified cell phones. Partnerships with AT&T, Verizon, and international carriers provide potential market access. The stock is highly speculative, dependent on successful technology demonstration and commercial service launch.

Planet Labs (PL)

Planet Labs operates the largest Earth observation satellite constellation, imaging the entire planet daily. The company serves government, agriculture, insurance, and other markets with satellite imagery and analytics. Planet has shown steady revenue growth but faces competition from higher-resolution providers.

Intuitive Machines (LUNR)

Intuitive Machines achieved the first successful US commercial lunar landing in 2024 with its Nova-C lander. The company has multiple NASA CLPS contracts and is developing lunar infrastructure services. The stock gained significant attention following the historic landing.

Satellite Communications Companies

Satellite communications represents the largest and most mature segment of the commercial space industry. These companies typically offer more stable revenue but face disruption from LEO constellations.

Key Satcom Considerations

Traditional GEO satellite operators face pressure from LEO constellation competition, particularly Starlink. However, several factors support continued relevance:

• Coverage: GEO satellites provide wide coverage with fewer spacecraft
• Established relationships: Long-term contracts with governments and enterprises
• Hybrid strategies: Many operators developing multi-orbit capabilities
• Specialized services: TV broadcast, maritime, aviation markets

Iridium stands out with its unique LEO constellation providing global mobile coverage, including the exclusive contract for tracking commercial aircraft. Globalstar has benefited from Apple's satellite SOS integration in iPhones.

Diversified Aerospace & Defense

Major defense contractors derive significant revenue from space programs, offering exposure to government contracts and established space capabilities with lower volatility than pure-play companies.

Defense Contractor Space Programs

Lockheed Martin is NASA's largest contractor, building the Orion spacecraft for Artemis and operating satellite systems for military and intelligence customers. The company's Space segment generates approximately $12 billion annually.

Northrop Grumman builds solid rocket motors for various launch vehicles, operates the Cygnus cargo spacecraft, and provides space logistics services through its MEV satellite life-extension vehicles.

Boeing is developing the Starliner crew spacecraft and builds satellites for commercial and government customers. The company also provides the first stage for United Launch Alliance's rockets.

Space ETFs

Exchange-traded funds offer diversified exposure to the space industry without requiring selection of individual stocks.

ARKX - ARK Space Exploration & Innovation

ARKX is the most recognized space-focused ETF, managed by ARK Invest. The fund holds a mix of pure-play space companies and enabling technology firms. Top holdings typically include Rocket Lab, Trimble, Kratos Defense, and various 3D printing and AI companies with space applications.

Critics note that ARKX's definition of "space" is broad, including companies with limited direct space exposure. The fund's active management means holdings change based on ARK's investment thesis.

UFO - Procure Space ETF

UFO focuses more narrowly on companies deriving significant revenue from space. Holdings include satellite operators, launch providers, and space services companies. The fund offers more direct space exposure than ARKX but with less liquidity.

Private Companies to Watch

Several significant space companies remain private, with potential future public offerings:

SpaceX

SpaceX is the most valuable private space company, with an estimated valuation exceeding $350 billion. The company has indicated Starlink may eventually be spun off as a public company. SpaceX shares trade on secondary markets at high valuations.

Blue Origin

Blue Origin, funded by Amazon founder Jeff Bezos, is developing the New Glenn heavy-lift rocket and New Shepard suborbital vehicle. The company has not indicated IPO plans.

Sierra Space

Sierra Space was spun from Sierra Nevada Corporation and has discussed potential public listing. The company is developing the Dream Chaser spaceplane and orbital station modules.

Investment Considerations

Growth vs. Profitability

Many pure-play space companies are not yet profitable, prioritizing growth and development over near-term earnings. Investors should evaluate:

• Cash runway: How long can the company operate without additional funding?
• Path to profitability: What milestones must be achieved?
• Revenue growth: Is the business scaling?
• Contract backlog: What visibility exists into future revenue?

Technology Risk

Space companies face significant technology risk. Rocket failures, satellite malfunctions, and development delays are common. Companies dependent on unproven technology (like AST SpaceMobile's direct-to-device system) carry higher risk than those with established operations.

Government Dependence

Many space companies rely heavily on government contracts. Changes in administration priorities, budget allocations, or procurement decisions can significantly impact revenue. Diversification across government and commercial customers provides stability.

Competition

SpaceX's dominance in launch and growing presence in satellite communications pressures competitors. Companies must either compete directly with SpaceX's cost structure or find differentiated market positions.

Macro Factors

Space stocks, particularly high-growth companies, are sensitive to interest rates and risk appetite. The 2022-2023 correction in growth stocks hit space companies hard. Many SPACs that went public in 2021 have lost 70-90% of their value.

SPAC Experience

The 2020-2021 SPAC boom brought numerous space companies public, including:

• Virgin Galactic (SPCE)
• Rocket Lab (RKLB)
• Planet Labs (PL)
• BlackSky (BKSY)
• Spire Global (SPIR)
• AST SpaceMobile (ASTS)
• Momentus (MNTS)
• Astra (ASTR)

Most SPAC-originated space stocks declined significantly from their initial valuations. Lessons for investors include:

• Projections were optimistic: Revenue forecasts proved unrealistic
• Development timelines slipped: Technology readiness was overstated
• Dilution was common: Additional funding rounds reduced shareholder value
• Some have recovered: Companies that executed (Rocket Lab) have regained value

Building a Space Portfolio

Conservative Approach

Investors seeking space exposure with lower risk might consider:

• Defense contractors with significant space segments (LMT, NOC, RTX)
• Established satellite operators (Iridium, SES)
• Space ETFs for diversification

Balanced Approach

A mix of established players and growth companies:

• Core holdings in profitable space companies
• Select positions in leading pure-plays (Rocket Lab, Planet)
• ETF allocation for broader exposure

Aggressive Approach

Higher-risk investors might focus on:

• Pre-revenue or early-stage companies
• Companies with breakthrough technology potential
• Secondary market access to private companies

Conclusion

The space industry offers compelling long-term growth potential as costs decline and applications expand. However, space stocks can be volatile, and many companies remain unprofitable. Successful space investing requires understanding both the industry dynamics and the specific position of each company.

Investors should consider their risk tolerance, time horizon, and the role space stocks play in their overall portfolio. Diversification through ETFs or a mix of established and growth companies can help manage risk while capturing sector growth.