If you're a growth-oriented investor looking for an opportunity beyond artificial intelligence (AI), space stocks may be the place to look. In this special presentation, we'll explain why you may want to take the time to research this sector and some names to consider if you're interested in investing.
Let's start with the why. History frequently rhymes. That's one way to explain why the 2020s may feel a bit like the 1960s regarding the space race. The "territory" around Earth is now filled with satellites and is vital to applications ranging from day-to-day communications to national security.
The United States was the first country to create a Space Force branch of the military with a focus on protecting our nation's satellites and other space assets. And other countries are urgently trying to create "Space Forces" of their own.
There's also renewed interest in returning humans to the moon. Earlier this year, NASA landed an unmanned craft on the lunar surface. The hope is that there will be a manned mission — Artemis 3, in 2026.
When it comes to how to invest in space stocks, you have many options. Several large cap companies are safe options to invest in this sector. More risk-tolerant investors can look at some small-cap moonshots that offer an opportunity for outsized returns.
Quick Links
- Lockheed Martin
- Northrop Grumman
- L3Harris Technologies
- Leidos Holdings
- Intuitive Machines
- Rocket Lab USA
- Planet Labs
#1 - Lockheed Martin (NYSE:LMT)
Lockheed Martin Corporation (NYSE: LMT) is the largest defense contractor in terms of revenue and market cap. The company's space sector helps to defend the United States and its allies from adversarial threats through programs such as missile defense. Lockheed is also helping create breakthrough technologies that aid space exploration, such as NASA's Orion spacecraft.
Seeing the company's business's scope shows how the space and defense industries are intertwined. Lockheed's space business generated $12.6 billion in revenue in 2023. Not only was that a 9% year-over-year (YOY) increase, it accounted for about 18% of total revenue.
Also, buying one of the mega-cap names in the sector comes with an attractive valuation. LMT stock currently trades at a forward price-to-earnings ratio of 16x. That's lower than the 21.2x average for the aerospace/defense sector. With the company projected to deliver full-year EPS of $28.36 in the next 12 months, Lockheed Martin may have more upside than the 14% analysts are forecasting. Plus, investors get a dividend with a yield of 2.93%.
About Lockheed Martin
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company operates through Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space segments.
Read More - Current Price
- $489.02
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $612.29 (25.2% Upside)
#2 - Northrop Grumman (NYSE:NOC)
Northrop Grumman Corp. (NYSE: NOC) is another mega-cap space stock that provides investors with a relatively risk-free way to get involved. Like Lockheed Martin, Northrop has been part of the space economy since it started in the 1960s. The company helps design and manufacture various products such as precision sensors, ground stations development, orbiting space platforms, and revolutionary launch vehicles.
Northrop Grumman's Space Sector accounted for $13.9 billion of revenue, about 35% of the company's total revenue. In the company's most recent earnings report, the company also reported a $40.5 billion backlog.
Like Lockheed Martin, NOC stock trades at around 18x forward earnings, a discount on the sector average of around 21.2x earnings. If the company delivers the 12.8% expected earnings growth, analysts are likely to raise their outlook with a consensus Hold rating as of March 7, 2024.
About Northrop Grumman
Northrop Grumman Corporation operates as an aerospace and defense technology company in the United States, Asia/Pacific, Europe, and internationally. The company's Aeronautics Systems segment designs, develops, manufactures, integrates, and sustains aircraft systems. This segment also offers unmanned autonomous aircraft systems, including high-altitude long-endurance strategic ISR systems and vertical take-off and landing tactical ISR systems; and strategic long-range strike aircraft, tactical fighter and air dominance aircraft, and airborne battle management and command and control systems.
Read More - Current Price
- $469.54
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $553.27 (17.8% Upside)
#3 - L3Harris Technologies (NYSE:LHX)
The last of the large cap stocks on this list of space stocks to buy is L3Harris Technologies Inc. (NYSE: LHX). L3Harris has a $40.3 billion market cap and is expected to post 11% earnings growth in the next 12 months.
One of the key factors driving that growth is the company's acquisition of Aerojet Rocketdyne in July 2023. This puts L3Harris on the list of contractors for the NASA Artemis missions.
The space sector accounted for $7 billion of revenue in 2023. That was 18% of the company's full-year revenue. But it included less than two full quarters with the acquisition of Aerojet Rocketdyne. That means this sector will likely increase in revenue, which will be bullish for the earnings and stock price.
L3Harris also continues the undervalued theme among the large-cap space stocks. It trades for just 16x forward earnings. But if the company makes good on the double-digit rise in earnings, analysts will raise their prices. And while they wait, investors get a growing dividend with a 2.13% yield that has been increasing for 23 consecutive years.
About L3Harris Technologies
L3Harris Technologies, Inc provides mission-critical solutions for government and commercial customers worldwide. The company's Integrated Mission Systems segment provides intelligence, surveillance, and reconnaissance (ISR) systems, passive sensing and targeting, electronic attack, autonomy, power and communications, and networks and sensors, as well as advanced combat systems for air, land, and sea sectors.
Read More - Current Price
- $213.55
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $269.13 (26.0% Upside)
#4 - Leidos Holdings (NYSE:LDOS)
With a $17.5 billion market cap, Leidos Holdings Inc. (NYSE: LDOS) is a large cap stock but not one of the mega-cap names like the first three space stocks on this list. But that's understandable when you understand that this is a company that's more of a picks-and-shovel play on the space industry's growth.
The company is helping to "embrace and solve some of the world's toughest challenges." As it relates to space, the company's Dynetics subsidiary is partnering with NASCAR to design a next-generation lunar terrain vehicle.
That being said, LDOS stock looks fairly valued at 16x forward earnings and expectations for $8.39 earnings per share at the high end of its 2024 outlook. However, with a dividend that has a 1.18% yield, which is only slightly below the sector average, you are getting a reward for holding onto the stock.
About Leidos
Leidos Holdings, Inc, together with its subsidiaries, provides services and solutions in the defense, intelligence, civil, and health markets in the United States and internationally. The company operates through Defense Solutions, Civil, and Health segments. The Defense Solutions segment offers national security solutions and systems for air, land, sea, space, and cyberspace for the U.S.
Read More - Current Price
- $144.81
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $182.00 (25.7% Upside)
#5 - Intuitive Machines (NASDAQ:LUNR)
Intuitive Machines Inc. (NASDAQ: LUNR) was one of the key suppliers that contributed to the primarily successful unmanned moon landing earlier this year. The news was certainly good for shareholders. LUNR stock is down 62% in the last 12 months but is up 34% in the last month. However, that gain has been trimmed by nearly 20% in early March as investors sold the news to take profits.
That's one of the risks with a small-cap company like Intuitive Machines. Short interest in LUNR stock is an uncomfortable 21.4% of the float. That creates a heavy lift for retail investors. And make no mistake about it, LUNR is still relatively undiscovered by Wall Street. About $29 million has flowed into LUNR stock in the last 12 months, but that represents only about 5% of shares.
Probably because the company's products will likely be part of a second unmanned moon landing later this year, analysts seem relatively undisturbed by the recent sell-off. They maintain a consensus Buy rating and have a price target of $12.25, which is 152% higher than the stock's current price.
About Intuitive Machines
Intuitive Machines, Inc designs, manufactures, and operates space products and services in the United States. Its space systems and space infrastructure enable scientific and human exploration and utilization of lunar resources to support sustainable human presence on the moon. The company offers lunar access services, such µNova, lunar surface rover services, fixed lunar surface services, lunar orbit delivery services, rideshare delivery services to lunar orbit, as well as content sales and marketing sponsorships; and orbital services, including satellite delivery and rideshare, satellite servicing and refueling, space station servicing, satellite repositioning, and orbital debris removal.
Read More - Current Price
- $13.57
- Consensus Rating
- Buy
- Ratings Breakdown
- 5 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $14.10 (3.9% Upside)
#6 - Rocket Lab USA (NASDAQ:RKLB)
Another small-cap space stock to watch is Rocket Lab USA Inc. (NASDAQ: RKLB). The company has a launch division and a services division. But you can't think about the company's services in the same way you might think about that of Apple Inc. (NASDAQ: AAPL).
Rocket Lab's primary business is launching small satellites into space. The company plans to move into larger payload launches, but it won't be competing with a company like Space-X.
That may be an attractive niche for Rocket Lab, and revenue is increasing year-over-year. Plus, because it's already launching rockets, the company has a first-mover advantage in a high interest rate environment that will keep some competitors at bay.
Analysts give RKLB stock a Moderate Buy rating with a $7.57 price target that is 71.7% higher than its price on March 7, 2024. However, the stock does carry about 16% short interest, which will continue to add volatility to the stock.
About Rocket Lab USA
Rocket Lab USA, Inc, a space company, provides launch services and space systems solutions for the space and defense industries. The company provides launch services, spacecraft design services, spacecraft components, spacecraft manufacturing, and other spacecraft and on-orbit management solutions; and constellation management services, as well as designs and manufactures small and medium-class rockets.
Read More - Current Price
- $24.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $17.44 (29.9% Downside)
#7 - Planet Labs (NYSE:PL)
Orbital imaging may not have the same cache as a lunar landing, but it does have many applications. That's why Planet Labs PBC (NYSE: PL) should get a closer look. The company uses small satellites that take detailed images of Earth that they sell to both civilian and defense customers. It is growing revenue year-over-year.
In 2023, the company announced it would partner with the U.S. Geospational Intelligence Foundation's 2023 GEOINT Symposium to use AI to enhance the detail in its images. That doesn't make PL stock an AI stock. In fact, the company is not yet profitable, and that's one of the reasons the stock is last on this list.
Nevertheless, it's an interesting stock to consider if you're a speculative investor looking for a moonshot in the emerging space stocks sector.
About Planet Labs PBC
Planet Labs PBC engages in the design, construction, and launch constellations of satellites with the intent of providing high cadence geospatial data delivered to customers through an online platform worldwide. The company's platform offers planet monitoring, basemap, tasking, apps, and application programming interfaces, as well as analytics and planetary variables.
Read More - Current Price
- $4.04
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $4.33 (7.1% Upside)
Now that you know some of the space stocks to consider, we'll close this presentation by explaining the size of the opportunity. In 2021, the global space industry was valued at $414.8 billion. Morgan Stanley (NYSE: MS) is forecasting the global space industry could be worth $1 trillion by 2040. If the space race intensifies, the value will likely be much larger than that.
But the last couple of years have reminded investors that it costs money to build rockets and the rest of the infrastructure that will form the foundation of a space economy. This is to say that the growth in this sector is not likely to follow a straight line.
Even if you're not ready to start a position today, you can use the MarketBeat watchlist tool as a shortcut for your research. You'll be alerted by email or text whenever there's breaking news involving one of the stocks on your list. It's a great way to confirm your thoughts about an investment before committing capital.
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