Space commercialization may make space tourism a reality. How can investors position their portfolios to take advantage of going orbital?
Private and public sector space investment is increasing
Global space industry could surpass $1 trillion by 2040
Space stock remains risky—both to travel to and invest in
The successful space trips in 2021 by Amazon (AMZN) founder Jeff Bezos’ Blue Origin and Richard Branson, founder of Virgin and Virgin Galactic (SPCE), meant more than just two billionaires being weightless in space for a few minutes. It may lead to advancements in commercialized space flights and scientific innovation too.
Although many of us can’t afford to bid on a seat for the next space flight—ticket sales for Virgin Galactic’s VSS Unity start at $450,000 a seat—there are a few ways investors can position their portfolios to take advantage of going orbital.
There’s certainly a lot of interest in space investing, even if a lot of it hasn’t shown profitability yet. Shares of SPCE more than doubled between the start of 2020 and mid-2021, for instance.
Elon Musk’s SpaceX is also in the thick of commercial space ventures. SpaceX has been around longer than both Blue Origin and Virgin Galactic and was the first to send astronauts to the International Space Station. It’s a private company, however, so investors can’t participate. SpaceX plans to fly a passenger around the moon in 2023, but its biggest businesses are heavy launch vehicles and satellites.
Other companies looking to develop commercialized spacecraft are familiar household names that offer the public a chance to invest, including Boeing (BA), Lockheed Martin (LMT), and Northrop Grumman (NOC). BA became a big player in the space tourism race when it signed an agreement with NASA as part of its Commercial Crew Development program to launch crew vehicles into space.
The private sector’s push into commercialized space flight could lead to greater space spending across the board, according to Michael Fairbourn, education coach at TD Ameritrade. President Biden’s proposed 2022 NASA budget contains more science funding than ever, at $24.7 billion, including a 9% increase in the agency’s science division and a 5% increase in funding for deep-space exploration systems. NASA still targets 2024 for the first piloted moon landing since 1972, though it’s possible the timetable on that might be delayed.
Fairbourn noted that SPCE’s Branson had originally priced space travel tickets at $250,000. Being able to increase prices is critical, and to do it sustainably is what might make the venture viable.
“Branson’s pretty good at getting a sense of demand,” Fairbourn said. “He has been with other products, at least. That’s just such an important point. If you can see the pricing going up like that, it’s central to generating those revenues consistently.”
Morgan Stanley’s (MS) Space Team estimates that by 2040 the global space industry could be worth more than $1 trillion, versus $350 billion in 2016.
Aside from companies developing ships and rockets for human flight, firms that might be thought of as “space adjacent” can profit through space-related technology that helps us on Earth.
A key part of making commercialized space flight a reality is satellites. This is one of the largest subsectors in the space industry, and these companies specialize in the infrastructure and technology of near-space and low-Earth orbit, which is where Branson and Bezos spent time. Established U.S. satellite companies include EchoStar (SATS) and Iridium Communications (IRDM).
Many start-up satellite companies are going public through special purpose acquisition (SPAC) companies, so that’s another area to consider watching.
Another critical area: satellite internet improvements that make communications between spaceships and Earth seamless and provide better broadband service back home. Innovations such as 5G may speed up communications and make them clearer. Companies in this sector include Dish Network (DISH), once a part of EchoStar; Sirius XM Holdings (SIRI); and Viasat (VSAT). Morgan Stanley forecasted that internet spending will garner the lion’s share of spending, estimating it at 39% of that $1 trillion.
“The most significant short- and medium-term opportunities may come from satellite broadband internet access,” Morgan Stanley stated in a recent report. “Launching satellites that offer broadband internet service will help drive down the cost of data, just as demand for that data explodes.”
Use a stock screener to narrow selections based on sectors.
Log in to your account at tdameritrade.com > Research & Ideas > Screeners > Stocks.
Satellites and broadband might be seen as more practical aspects of investing in space. The riskier area could be space tourism, which is highly speculative. Several companies and concepts have ended up in the dustbin, including a Spanish company that wanted to create a hotel-like space station. Also, a 1960s proposal for a starship powered by exploding nuclear bombs appears to be off the table.
Then there are safety issues. Space-travel safety experts noted neither Branson nor Bezos wore the pressure suits NASA and other nations require for protection from rapid decompression outside the Earth’s atmosphere. Under Armour (UAA) designed the space suits for Virgin Galactic.
According to Bloomberg News, there are no safety standards for the commercialized space industry, and Congress exempted U.S. space tourism from federal safety oversight for crews. This exemption lasts until at least 2023.
Space accidents are deadly, and two of them occurred with NASA’s Space Shuttle. Out of 135 missions from 1981 to 2011, 14 people died during the shuttle program. NASA grounded the Space Shuttle for two years after the 1986 Challenger disaster, and the agency scrapped its Space Flight Participant Program, which would’ve sent private citizens into space.
A deadly mishap in the nascent commercialized space industry could easily scuttle the advances made and set it back for years, so investors need to be cautious. It’s also helpful to assess which companies are riskiest. A company working on crewed travel to the moon or Mars, for instance, might be more vulnerable to a disaster than a company trying to improve 5G through satellites.
Then again, the payoff possibilities for investors might be better if they’re willing to take on more risk. They could also lose everything, so remember: If you invest in this area, don’t put in more than you can afford to lose.
Even if there aren’t any spectacular and tragic mission failures, space is an area that’s defeated many governments in the past and may continue to defeat private companies, too.
For now, the high costs of manufacturing or mining on an asteroid or on Mars likely outweigh the possible revenue from those operations. Companies that succeed in space will need to find a way to get the price of missions and development down enough where it makes sense to operate there rather than on our own planet.
Eventually (and this may be way down the road), space could offer manufacturing and mining opportunities pretty much undreamed of on Earth. According to Forbes, a single 140-mile-wide asteroid (named 16 Psyche) made of iron and nickel could have resources worth $1 trillion.
Mining an asteroid and manufacturing products in space, if it could be done profitably, presents what might be a big step in green technology. Any pollution associated with the activity would be in space, not on Earth. Some scientists see a future where Earth eventually becomes more of a “garden spot” of the solar system, free from the pollutants of manufacturing and mining, which would occur on asteroids or moons. Companies that find a way to do that could become popular with the environmental, social, and governance investing crowd here at home.
Still, that’s probably decades away, if not more. For now, investors might have to approach the space industry “one small step” at a time.
Debbie Carlson is not a representative of TD Ameritrade, Inc. The material, views, and opinions expressed in this article are solely those of the author and may not be reflective of those held by TD Ameritrade, Inc.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2021 Charles Schwab & Co. Inc. All rights reserved.