MW These space stocks deserve attention, analysts say
By James Rogers
It's been a busy few weeks for the commercial space industry
It has been a busy few weeks for the U.S. commercial space industry, marked by milestone launches that have thrust space-related stocks into the spotlight.
Last week, Boeing Co.'s $(BA)$ Starliner capsule launched on its eagerly anticipated first crewed flight after a series of delays. The spacecraft lifted off atop a United Launch Alliance Atlas V rocket from Cape Canaveral Space Force Station in Florida on June 5 and docked at the International Space Station the following day, albeit after last-minute thruster trouble and the detection of helium leaks.
The first crewed Starliner mission has faced a number of delays in recent years, so the launch marked an important milestone for NASA, Boeing and their partners. The launch is part of NASA's Commercial Crew Program, which partners with the private space industry in the U.S. to transport astronauts to and from the International Space Station.
Related: Boeing's Starliner launches on historic first crewed flight
Boeing shares have fallen recently, weighed down by the company's latest aircraft-delivery data, and are down 30.9% in 2024.
However, Joel Lim, a financial analyst at investing-information website Trading.biz, still sees Boeing as a promising space stock. "Boeing is continuing to fall, with few orders last month," he told MarketWatch. "However, their fundamentals are still strong, and with their joint venture, United Launch Alliance with Lockheed Martin, it is bound to skyrocket in price over the long term, with the current stock price simply being a good discount."
ULA was set up as a joint venture between Boeing and Lockheed Martin Corp. $(LMT)$ in 2006. Since then, the company's Delta and Atlas rockets have been used to send more than 150 missions into orbit.
Related: Virgin Galactic completes final Unity flight, sets sights on new Delta spacecraft
Virgin Galactic Holdings Inc. $(SPCE)$, which successfully completed the final commercial flight of its Unity spacecraft on Saturday, has also been busy. The spaceflight company founded by Richard Branson will now halt commercial operations to develop its new Delta-class spacecraft, which is expected to enter commercial service in 2026. Late Wednesday, Virgin Galactic announced a reverse stock split, causing the stock to tumble.
Virgin Galactic shares are down 14.4% Thursday, putting the stock on pace to extend its losing streak to two days. "The Virgin Galactic launch on June 8th did cause the stock to skyrocket in stock price," Trading.biz's Lim told MarketWatch. "However, the recent stock split has caused the company to drop suddenly in price."
Lim has identified Virgin Galactic, like Boeing, as a promising space stock, recently describing it as "an exciting bet in the market" and pointing to the company's "first-mover advantage" in the commercial-spaceflight industry.
Related: Virgin Galactic shares plunge on reverse-stock-split announcement
Virgin Galactic shares are down 69.8% in 2024, compared with the S&P 500 index's SPX gain of 13.6%.
Last week also saw private space company SpaceX complete the fourth test flight of its Starship, marking another milestone for the company's giant spacecraft and rocket.
Other space stocks have also been grabbing attention recently. Last month, shares of space-based broadband company AST SpaceMobile Inc. $(ASTS)$ surged following the announcement of a deal with Verizon Communications Inc. $(VZ)$. The deal is further evidence of the company's strength in the emerging satellite cellular broadband market, according to UBS.
Related: Elon Musk hails 'epic' SpaceX Starship test flight as spacecraft makes Indian Ocean splashdown
"AST is a high-risk, high-reward type investment, but we believe it will be a leader in the emerging space-to-cellular broadband market - an industry with the potential to generate $10s of billions in annual revenue by providing uninterrupted coverage to traditional mobile devices," UBS analyst Christopher Schoell wrote in a note last month. "Satellites have long been used for connectivity but the ability to offer broadband directly to existing phones will be the next leg of growth."
UBS, which has a buy rating for AST SpaceMobile, raised its price target to $13 from $7 Monday. AST SpaceMobile shares are up 67.3% in 2024.
Launch provider Rocket Lab USA Inc. $(RKLB)$ also continues to attract attention. "Rocket Lab remains the leader in small launch (Electron), Neutron is still coming to market faster than any other rocket development program, and the company is also meaningfully expanding its space systems business to become a true end-to-end vertically integrated space company," Stifel analyst Erik Rasmussen wrote in a note last week. Rasmussen noted that the inaugural launch of the Neutron rocket has been pushed back to no earlier than mid-2025, from late 2024, but said that this "doesn't change Rocket Lab's opportunity in Launch."
The 141-foot-high Neutron rocket is designed for the deployment of "mega constellations" of satellites, deep-space missions and human spaceflight, according to Rocket Lab.
Stifel has a buy rating for Rocket Lab. The company's shares are down 17.5% this year.
Related: These are the space stocks to keep an eye on in 2024
The moon is also looming large for the space industry. Intuitive Machines Inc.'s (LUNR) IM-1 mission made history earlier this year when the company's Odysseus became the first commercial lander to successfully land on the lunar surface. Odysseus reached the moon on Feb. 22, sending the company's stock soaring. Intuitive Machines subsequently said that the lander has "permanently faded" and has no chance of waking up on the moon.
But the landing has paved the way for future missions, with Intuitive Machines' IM-2 mission to the moon's south pole planned for late 2024. The missions are supporting NASA's Commercial Lunar Payload Services initiative, which is part of the Artemis program that aims to eventually return U.S. astronauts to the moon.
"[The first quarter of 2024] was historic both for the Space industry as well as [Intuitive Machines] executing the first commercial landing on the Moon," Benchmark analyst Josh Sullivan wrote in a note last month. Sullivan also noted the company's better-than-expected revenue and narrower-than-expected adjusted Ebitda loss in its recent first-quarter results. Benchmark has a buy rating for Intuitive Machines.
Intuitive Machines shares are up 57.7% in 2024.
-James Rogers
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June 13, 2024 12:16 ET (16:16 GMT)
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