When I asked Bard for some “out of this world” information on investing in space stocks, it gave me Virgin Galactic (NYSE:SPCE), Rocket Lab USA (NASDAQ:RKLB), and the iShares U.S. Aerospace & Defense ETF (BATS:ITA). It also said, “The space industry is still in its early stages, and there is no guarantee of success for any individual company. However, the potential rewards for investors who are willing to take on the risk could be significant.”
For one, optimistic analysts at Bank of America and Morgan Stanley, for example, say the space economy could grow by over $1 trillion a year in the next decade. Two, Virgin Galactic just conducted its first commercial space tourism mission. And three, even though the missions don’t reach orbit, companies, like SPCE, have a backlog of customers who have already paid more than $450,000 per ticket to traverse space for just a few minutes.
Virgin Galactic (SPCE)
According to Bard, Virgin Galactic (NYSE:SPCE) “is a company that is developing suborbital spaceflight vehicles. The company has already conducted several test flights, and it is expected to begin commercial operations in 2023.” There’s also hope more spaceflights will happen soon, especially with a company backlog of about 800 passengers who paid up to $450,000 for a single round trip.
Granted, its chart is nothing to write home about just yet. But give it time. Further flight success and a maturing industry could send Virgin Galactic to the moon. Right now, with the latest tests, the company is now closer to seeing real revenue, and a reduction in uncertainty over business operations.
Also, according to the company, each aircraft can generate up to $2.7 million in revenues per flight, assuming full capacity. And sure, Virgin Galactic will remain free cash flow negative for the fiscal years 2023 and 2024, flight success could ramp up revenue, and stock valuation. It’s another one of the top ways for successful investing in space stocks.
Rocket Lab USA (RKLB)
Rocket Lab USA (NASDAQ:RKLB) has been an explosive idea for investing in space stocks. Since bottoming out in May, the stock ran from about $3.80 to a recent high of $5.97. For one, the company just successfully launched its first suborbital testbed launch vehicle – HASTE (Hypersonic Accelerator Suborbital Test Electron).
“The success of this mission demonstrates collaboration across government and industry partners to change the paradigm in hypersonic testing,” said Brian Rogers, Senior Director – Global Launch Services.
Also, second-quarter earnings are coming out on August 8 after market close and could be just as impressive as first-quarter numbers. In fact, in Q1, the company delivered financial results that exceeded the high end of guidance for revenues and gross margins. It launched three successful Electron missions and completed its first launch from its U.S. launch site.
Plus, it reportedly remains the only U.S. commercial small launch provider to successfully deliver satellites to orbit in 2023, as noted in a company press release. The company is also set to launch its Electron rocket for NASA’s Starling mission from Mahia Peninsula, New Zealand mid-month.
iShares U.S. Aerospace & Defense ETF (ITA)
Bard also mentioned the iShares U.S. Aerospace & Defense ETF (ITA). With an expense ratio of 0.39%, the ETF invests in aerospace and defense stocks, including Raytheon Technologies (NYSE:RTX), Boeing (NYSE:BA), Lockheed Martin (NYSE:LMT), L3Harris (NYSE:LHX), General Dynamics (NYSE:GD), and Textron (NYSE:TXT) to name a few.
Since the start of the year, the ETF ran slightly from about $110 a share to $116.75. Much like the rest of the market, the ETF has seen a good deal of volatility so far. If ITA can break above resistance dating back to 2020, I’d like to see it closer to $120.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
