Investing in space industry
More than half a century ago, a historic event took place: A man was sent into space for the first time. Since then, a lot has changed both in the space industry itself and beyond. However, one thing has remained unchanged: The development of space technologies remains one of the most important engines of progress.
Even with the Covid-19 crisis, private investment in space companies set a new annual record in 2020 at US$8.9 billion. In total, over the last 10 years, there has been $186.7 billion of equity investment across 1,480 companies in the space economy.
Morgan Stanley estimates that the global space industry could generate revenue of $1 trillion or more by 2040, up from $350 billion currently.
The question that should be asked, then, is whether it is worth investing in space-company stocks.
First, it is worth noting that the space infrastructure includes several sub-sectors: production (including spacecraft launchers); satellite operators; satellite applications and services; and support services. Satellite applications and services account for the majority of the sector's turnover (74%), followed by space operations (15%), manufacturing (8%), and ancillary services (3%).
Looking at the private space companies, the most famous are SpaceX, Blue Origin and Virgin Galactic, led by Elon Musk, Jeff Bezos and Richard Branson respectively. With the development of reusable rockets and the creation of Virgin Galactic's SpaceShipTwo and Blue Origin's New Shepard spacecraft, space tourism may soon become a reality.
The main problem is the cost of the flight. If you are willing to travel to the cosmos with SpaceX, get ready to fork out around $55 million per seat. Suborbital flights by Blue Origin and Virgin Galactic, in turn, cost $200,000 and $ 250,000. Yet Branson's Virgin Galactic has already booked more than 600 tickets. The company expects to begin commercial space travel as early as next year and ultimately hopes to bring ticket prices down to around $40,000.
Thus, theoretically, space companies could become an interesting investment opportunity. The only problem is that neither SpaceX nor Blue Origin is planning to go public any time soon.
In the case of Virgin Galactic Holding, the company's shares are up a staggering 90% since the beginning of the year. This rally could be due partly to the fact that the company received a license from the US Federal Aviation Administration for a commercial launch after a successful test flight in May.
However, Virgin Galactic stock still looks quite expensive. The consensus estimate for revenue for 2022 is only about $50 million. In addition, there is a lot to be done before the company can increase revenue, and profit is probably still a long way off.
If you still see promising prospects for the space sector, then one of the alternative options could be Procure Space ETF, which includes shares of companies such as Boeing, Maxar, Iridium Communications, Intelsat and Airbus.