Maxar Technologies Ltd.

+4.17%

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Rocket Lab USA, Inc.

-0.17%

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The recent dip in the markets offers investors a strong selection of potential investment vehicles that might someday go to the moon in the financial sense. In the literal sense, a few space-based companies have set their sights in that general direction for the near future, aiming for continued success and growth if and when market pressures abate.

Virgin Galactic Holdings hopes to become the first real passenger spacecraft company, and it has years of experience and investment that could well pay off as soon as early next year. Maxar Technologies is a leader in geospatial intelligence. While it dipped during the pandemic, the satellite imagery expert has shown it can succeed as the space race continues into the future. And Rocket Lab USA has a diverse portfolio of space logistics services, continuing successful launches as a satellite delivery company with plenty of room and plans for growth.

1. See outer space courtesy of Virgin Galactic

Virgin Galactic relies on the allure of space tourism to bring in investors, and each year it inches closer to deploying passenger flights. Missing that goal before the 70th birthday of its founder, Richard Branson, sent the stock tumbling in 2020 from around $22 to new lows closer to $6 recently, but the space cruise retains much of its promise. The stock's resilience shows as recently as the summer of 2021, when Richard Branson finally reached space and sent share prices soaring again in mid-July before another roller-coaster ride led to recent lows.

Pandemic woes and concerns about the price tag and overall availability of launches account for much of the turbulence since then. Companies including Blue Origin and SpaceX continue to deliver positive news, while Virgin Galactic experienced multiple high-profile rocket failures and testing delays, driving it to push back its expected commercial service launch dates to the second quarter of 2023.

The company still anticipates profitability once flights get underway, and a partnership with Virtuoso is underway to sell the first 1,000 seats on board at a ticket cost of $450,000 per passenger. Virgin Galactic's cash position remains strong, at over $1.1 billion in assets, offering some assurance that it has the funding to complete testing and deliver on its greatest promise, commercial space flight. With each new major development, including Branson's successful personal space junket in 2021, stock prices soared back to highs over $50, making today's low prices seem like a great deal overall. The August 2022 earnings report showcased deals with Boeing for two new mother ships, capable of 200 launches a year beginning as soon as 2025, making this a long-term choice that may well appeal to a value-minded investor during the dip.

2. The undeniable power of Maxar's eyes in the sky

The satellite intelligence that Maxar Technologies provides remains a cornerstone of managing global conflicts and aiding the boots on the ground. Citizen journalists and major government entities alike continue to rely on images from Maxar's satellites, and the company's news bureau delivers timely information on global conflicts to key personnel in moments. Nations once unfamiliar with Maxar's intelligence assets now seem interested in its offerings, and that windfall has allowed Maxar to extinguish debt and prepare for future expansion.

Current geopolitical events continue to drive exposure and relevance for the company's imagery, and it is one of the few stocks in the industry that has outperformed the S&P 500 by 12 percentage points over these rocky last six months. August 2022 earnings indicated strong overall performance, as the company moved to extinguish $50 million in debt and adjusted EBITDA moved from May's $84 million to $119 million. Similarly, operating cash flow grew by $19 million.

The National Reconnaissance Office (NRO) awarded the geospatial intelligence company a 10-year contract with a potential value of $3 billion or more in May as part of the Electro-Optical Commercial Layer Program. Further governmental awards and development contracts could further bolster the strength of the company as it continues to grow. Overall share prices have also shown great resilience, recovering from recent lows of around $5 to current values around $28, but plenty of room for growth remains.

3. Momentum for Rocket Lab's satellite deployment

Rocket Lab USA offers services to those looking to deploy or manage their satellites. Its most recent services include missions to the Moon and R&D contracts with the U.S. Space Force and NASA. Those contacts remain a crucial part of the overall profitability of the company, which boasts around 150 successful satellite launches using its platform and 300 proprietary engine launches. Rocket Lab just recently completed another satellite deployment contract with the NRO.

These space truckers get satellites and other essential infrastructure where it needs to go, a crucial part of a space-based economy that Morgan Stanley expects to hit $1 trillion or more in 2040.

Despite 2022 being a banner year for successful missions and new technology deployments, Rocket Lab stock has dropped from $12 at the start of the year to half or below, nearing $4 in recent weeks. The August earnings report provides some insight into why the stock still trades so low, as a focus on governmental partnerships, awards, and contracts seem to recognize the likeliness of continued market sluggishness and potential recession that could hamper overall profitability in the short term. These same conditions could provide a potential dip opportunity if shares return to previous price levels, approaching $20 in the past, as the company continues to prove itself over time.

Investing in the final frontier

Space as an industry remains in its infancy, with great expansion expected. As with all investments, especially in uncertain times, promises that seem to offer the moon may fall short, but these three companies have a strong history of delivering on those promises, even when delayed. As a result, this set of space stocks to watch might well contain some big future winners, and the current dip offers a strong opportunity for those who can bear the risk.

source：Motley Fool