Ongoing developments in next generation launch vehicles, as well as lunar missions, together with the rising interest of the private sector in space exploration, make space explorations stocks potentially lucrative targets for investors. The rivalry between the two global superpowers is growing ever more heated, and both the United States and China are pouring money into space exploration and development, from satellites to moon landing missions. Space exploration stocks could then be potentially lucrative investments for investors who buy these stocks early.
One thing I appreciate the most about these space exploration stocks to buy is that many of them trade at very low valuation ratios. Most of the companies discussed in this list are penny stocks with market capitalizations that promise a hefty upside.
The risks of investing in space exploration stocks is significant. However, I feel that owning a small position in some of these stocks may improve risk-adjusted returns over the long run thanks to their promising prospects for growth.
Rocket Lab (RKLB)
Rocket Lab (NASDAQ:RKLB) is one of the best space exploration stocks to buy according to my estimates. The standout figure is Rocket Lab’s record quarterly revenue of $106 million, representing a massive 71% year-over-year increase. Unlike some other space exploration stocks that have encountered significant operational setbacks and tepid demand, RKLB stock demonstrated. CEO Peter Beck emphasized this point, stating that the results demonstrate “the strong and growing demand for our launch services and space systems products, and importantly, our team’s ability to execute against it.”
Furthermore, I think that the best has yet to come for investors in RKLB stock, as the future looks accretive. Their Electron rocket remains the leading small launch vehicle globally, and it has attracted 17 new launch contracts year-to-date.
Although RKLB stock is currently unprofitable, the firm’s gross margin stands at a healthy 30%, with the Neutron rocket being a major draw card for the firm to improve its profitability in the future.
Virgin Galactic (SPCE)
Virgin Galactic (NYSE:SPCE) also had many positive developments to report in its second-quarter earnings for this year. A key highlight is the successful completion of VSS Unity’s operational phase with the ‘Galactic 07’ mission. The VSS Unity was SPCE’s space plane that made its first successful commercial flight. It recorded a per-seat revenue of $900,000, which I feel is a great sign that there’s commercial interest in SPCE’s future Delta-class spaceship program that is due to commence commercialization in 2026.
CEO Michael Colglazier’s statement that “Progress on our Delta Class spaceship program was substantial in Q2, with the pace of design completion accelerating and tool fabrication underway” is particularly encouraging to me, as operational milestones are apparently being completed on schedule.
The firm’s $821 million in cash also buys its substantial runway. In fact, judging by its adjusted amount of cash burn, this even allows SPCE to miss its 2026 target without needing to take on debt or issue shares, which preserves upside. It could then be one of those space exploration stocks for investors to consider.
Lockheed Martin (LMT)
I like Lockheed Martin (NYSE:LMT) as one of those space stocks for investors who prefer owning less speculative investments. Although it is primarily known for its aircraft and is America’s largest defense contractor, it has a sizable and growing presence in the space industry. For instance, last quarter, space segment net sales increased by $310 million, or 10%, compared to Q1 2023. Not only did its top-line expand, but its operating profit did too, growing by $45 million, or 16%, compared to the same period last year.
LMT stock saw the largest top-line growth in strategic and missile defense programs, which saw a $140 million increase compared with the same period last year. Meanwhile, National security space programs also saw a sizable boost, recording $115 million in additional revenue. This can be broken down into its Transport Layer and GPS III programs.
As the new space race has a fundamentally geopolitical aspect to it, I expect that demand for LMT’s revenues and profits to rise in its space segment as orders to the U.S. and NATO allies ramp up in response to heightened tensions.
Terran Orbital (LLAP)
Terran Orbital (NYSE:LLAP) is a small satellite manufacturer that I believe has great potential. Its recent quarterly results were impressive, with a great amount of demand for its services. Small satellites tend to be favored by defense contractors. This is evidenced by their sizable backlog, which stood at $312.7 million as of June 30th. A substantial portion of this backlog is tied to programs with Lockheed Martin.
LLAP stock is a tiny business compared with the other space exploration stocks on this list, as it has a market cap of just $145 million. As such, it is going through teething issues, but it is also making promising progress. While revenues dipped slightly year-over-year, gross profit increased to $2.8 million in Q2 2024, up from just $0.8 million in Q2 2023. The company also reduced its net loss.
The market for small satellites is growing, and its relationship with LMT for much of its revenues is both a blessing and a curse, lest there be a downturn in defense spending. However, my view is that tensions will continue
Redwire (RDW)
Redwire (NYSE:RDW) is an American aerospace manufacturer. Like other space exploration stocks in this article, the company also reported promising results last quarter.
The most striking figure is the 30% year-over-year revenue growth to $78.1 million. I also think that RDW is potentially undervalued as one of those space stocks you could write home about – their contracted backlog increased by nearly 30% year-over-year to $354 million.
One of the hottest trends for space exploration stocks is the rise of Very Low Earth Orbit (VLEO) satellites and satellite constellations. The satellites orbit close to the Earth, which is welcomed by communities in remote areas and governments seeking reduced latency for internet and voice communications. RDW stock has its SabreSat VLEO, which it secured a key win for last quarter in the form of a flight contract. CEO Peter Cannito described RDW as having “strong strong financial and technical momentum” as it heads into Q3.
Iridium Communications (IRDM)
Iridium Communications (NASDAQ:IRDM) is a global satellite communications company. It provides both data and voice connectivity worldwide. This year seems to have been especially accretive for space exploration stocks, as Iridium’s Q2 2024 results demonstrate solid growth.
Their total revenue increased by 4% year-over-year, driven by a 5% growth in service revenue, which now accounts for 76% of total revenue. Most notably, service revenue is recurring in nature, which provides the firm with a solid base for its future financial health.
There are two sterling examples from IRDM earnings that makes me think that it will continue to surprise the market. The firm has a solid relationship with the U.S government, and it has additional contract revenue from it starting in September this year. Another shining example is that it expects to see a continued expansion of its revenue growth and an indirect boost to its net income could be on the cards via its strong tax management strategies.
Spire Global (SPIR)
Spire Global (NYSE:SPIR) provides space-based data and analytics. I like it for a few reasons, notably due to its recent results. Revenue burgeoned 6% year-over-year to $25.7 million in Q1 2024, while Annual Recurring Revenue (ARR) swelled 15% to $120.9 million.
SPIR might also be suitable for green investors, per recent comments by SPIR Global’s CEO Peter Platzer. The CEO stated: “Climate change and global security challenges are drivers of demand for our business. They are becoming more frequent and costly.” For me, this dovetails seamlessly with Spire’s focus on providing critical data and insights in these domains.
Peering into the future, Spire’s guidance for Q2 2024 and full-year 2024 gives me reason to give it a buy recommendation. The company has accounted for a 20% sequential revenue growth in Q2, with positive adjusted EBITDA of $3.5 million at the midpoint.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.