In this latest Research article, we have the awesome Chuck Saletta (contributor to Motley Fool) sharing some fantastic insights on space stocks.
Whether or not extraterrestrial life is out there, humanity is getting ready to expand its impact beyond the Earth.
Back in the 1960s, astrophysicist Frank Drake first popularized what is now known as the Drake Equation. That equation attempts to estimate whether there is technologically advanced life on other planets in our galaxy.
With an uptick in reported UFO sightings supported by a rise in exoplanet discoveries, there is certainly renewed interest in the possibility of finding intelligent life out there. Those exoplanets, after all, represent more locations for life to potentially exist, which is one of the Drake equation’s key factors in estimating how many other inhabited worlds could be out there.
Whether or not we truly find extraterrestrial life within the next few decades, the reality is that between telecommunications and GPS satellites, our daily lives are already starting to rely on outer space. That raises a key question -- what companies involved in space exploration could be potentially worth investing in?
Pure plays are hard to come by
Unfortunately, most of the purely space-related companies out there, like SpaceX, are privately held by billionaires. That structure is important because it’s still very expensive to get stuff launched into space. The investors involved need to be very patient and willing to lose money for a while as they work through the long-term design and development costs needed to reach any sort of decent scale.
Virgin Galactic is one of the few pure publicly traded space-based companies out there (NYSE: SPCE). While Virgin Galactic does generally focus on things like space cargo and space tourism, it is not currently profitable -- nor is it expected to be profitable within the next few years. Indeed, the earliest chance at positive earnings will be in 2027 -- and even that chance seems slim to many analysts.
As a result, investors who want to focus on exclusively space-based companies have to recognize the long road to profitability ahead of them, as well as the risks that the profitability won’t materialize.
Companies with some space exposure
Another approach to consider if you’re interested in investing in space-centric opportunities is to consider companies where space is only part of what they do. For instance, United Launch Alliance is a joint venture owned by two publicly traded aerospace firms, Boeing (NYSE: BA) and Lockheed Martin (NYSE: LMT). While United Launch Alliance currently serves mostly terrestrial goals, it has its scope set on enabling a thriving lunar -- moon-based -- economy.
As far into the future as that goal may be, a key advantage that United Launch Alliance has is that its parent companies are successful aerospace businesses in their own rights. That gives it access to expertise -- and potentially funding -- to continue to reach for that very lofty vision.
Boeing, for instance, is one of the two largest wide-body passenger airplane manufacturers in the world, building hundreds of such planes each year. Boeing is expected to earn around $4.86 per share in 2024, upon an anticipated return to profitability after recovering from multiple issues it faced with its 737 Max line of planes.
Lockheed Martin is perhaps better known for the military-related equipment it provides, such as the C5 Galaxy airplane and Black Hawk helicopter. At a time like now, with wars raging in both Europe and the Middle East, its military-related services are in high demand.
Lockheed Martin is expected to earn nearly $28 per share in 2024, yet it is important to recognize that the company has proven itself profitable even in times when wars are not actively raging. After all, even in times of peace, equipment needs to be maintained and upgraded, and soldiers need to prepare and train for potential conflicts. That drives some demand for its services, even in times of peace.
Either way, if you own shares in either Boeing or Lockheed Martin, then by extension, you own part of its share of their space-focused joint venture, United Launch Alliance.
Look for more activity as 2025 gets closer
Any investor looking to profit from space needs to recognize that it takes a lot of investment, a lot of time, and a lot of risk to even get an initial foundation in place. Still, 2025 will likely mark a huge milestone in that effort, as the United States’ NASA expects to launch a manned mission to the moon that year.
That mission is set to explore the moon’s south pole, which is important because that region is known to contain water ice. If the moon is ever going to be used as a permanent outpost or launch point for missions elsewhere into space, being able to use that locally sourced water will be critically important.
Success there could very well create a whole new space-based industry, giving investors a potential path to ongoing profitability.
Just to keep you in the loop, at the time of publication, Chuck Saletta owned shares of Lockheed Martin and had the following options positions in Boeing: Short Jan 2025 $145 Puts, Short Jan 2025 $180 Puts, Long Jan 2025 $180 Calls, Short Jan 2025 $200 Calls.
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