Trading the Space Exploration Sector: Where No Investor Has Gone Before
The space exploration industry has blossomed into a $350 billion enterprise, with some projections indicating it could double in size during the next decade
For thousands of years, human civilization has been captivated by the cosmos and the possibilities offered by the unknown universe.
The arrival of the telescope—which was invented back in the early 1600s—was a critical turning point in humankind’s ability to explore outer space. But it took several hundred more years before the possibility of traveling outside Earth’s atmosphere became a tangible reality.
Back in 1903, Konstantin Tsiolkovsky published his paper The Exploration of the Universe with Rocket-propelled Vehicles. In that ground-breaking missive, Tsiolkovsky demonstrated that space exploration was theoretically possible, and detailed his “Tsiolkovsky rocket equation,” as well as outlining the concept of multi-stage rockets.
The rest, as they say, is history.
Today, the space exploration industry has blossomed into a $350 billion enterprise, with some projections indicating it could double in size during the next decade. While the unknown still inspires many passionate sci-fi enthusiasts, it’s the known—and increasingly realistic space economy—that has reeled in the investment community.
World governments, as well as the private sector, are now jockeying to identify and control economic value well beyond the surface of the earth. The results of these efforts will undoubtedly shape humanity’s place in—and perception of—the known universe.
But in the near term, there’s a huge difference between pie-in-the-sky dreams (aka colonizing mars), and tangible economic achievements that can be executed in the foreseeable future.
Today, the reality is that Earth’s atmosphere is the primary target, with satellite-based economic activity representing the near-term prize.
Why near-term growth in the space industry hinges on satellites
Any object that’s intentionally placed in orbit around the Earth is typically referred to as a satellite. A satellite might be as close as 110 miles from the planet’s surface, or as far as 22,000 miles.
Satellites are usually tasked with a specific mission and purpose, which may involve broadcasting, communications, navigation, scientific research, observation or some combination therein. To execute their function, satellites are typically equipped with a system for generating electricity, as well as a method by which the satellite can communicate its data back to earth, via a transponder.
Satellites are delivered to the atmosphere using launch vehicles and are usually placed high enough that they can avoid orbital decay. Some satellites are equipped with chemical or ion propulsion systems that allow them to change and maintain their position using thrusters.
The vast majority of satellites are programmed to focus on Earth’s surface and atmosphere, however, some are also tasked with looking out into space.
In recent years, advancements in rocket technology—particularly reusable rockets—have greatly reduced the cost associated with launching satellites. As a result, the advent of the reusable rocket has been compared by some to the invention of the elevator, which transformed the world’s architectural landscape back in the mid-1800s.
Today, reusable rockets have been described as the modern equivalent of the elevator—moving people and objects up into the atmosphere. It’s the cost savings associated with reusable rockets that really helps illustrate the revolutionary nature of this key technological development.
For example, the cost to launch a satellite using a non-reusable rocket is roughly $200 million, depending on the payload in question. That cost drops to roughly $60 million (on average) when using a reusable rocket. It’s not difficult to envision how those cost savings might impact the satellite industry, and associated growth potential.
The reality is more satellites are coming to Earth’s atmosphere, and soon.
Number of active satellites (by year, 1957 to 2021)
The U.S. Federal Communications Commission (FCC) recently adjusted the requirement for satellite operators to remove their satellites from earth’s orbit, dropping the deadline to within five years after mission completion, from the previous deadline of 25 years.
Providers of deorbiting services will no doubt be one of the biggest beneficiaries of the new FCC mandate.
However, the fiercest commercial battle that most industry analysts are expecting to be fought in Earth’s atmosphere will involve broadband internet service providers.
SpaceX—run by billionaire Elon Musk—is currently making a splash in satellite-focused broadband internet. Known as Starlink, this service is operated by a network (constellation) of 3,300 interconnected satellites that currently provide internet access to over one million subscribers across 45 countries.
The Starlink network is expected to add many more millions of subscribers, and thousands more satellites, in the coming years.
But competition in satellite broadband is expected to be fierce, with existing players and new entrants planning equally ambitious networks. Current competitors for Starlink include Hughes Net and Viasat (VSAT), while Amazon (AMZN), OneWeb and Telesat (TSAT) are expected to enter the market at some point in the foreseeable future. Hughes Net is a wholly-owned subsidiary of EchoStar Corp (SATS).
Demand for the heavy-duty wattage provided by satellite internet is also growing rapidly, with possible applications in the fields of artificial intelligence, autonomous vehicles, the internet of things and virtual reality.
A report produced by analysts at Morgan Stanley recently projected that through 2040, between 50-70% of the expected growth in the space industry could be driven by satellite-based broadband internet.
Importantly, information is a two-way street, and data collection will also be a key driver of growth in the space industry during the next decade. Data collected by satellites can be used for a wide range of purposes, including weather, climate, military reconnaissance, transportation and trade, among many others.
The data collection process is executed using remote sensing (ground-based, airborne and space bourne), as well as satellite imagery. As satellite data collection capabilities advance, so too will the potential applications of that information.
Trading the space industry
SpaceX is one of the most visible companies in the space industry, but unfortunately, it is not yet publicly traded.
An initial public offering (IPO) of SpaceX could be forthcoming at some point later in 2023 or early 2024, but the timing of that IPO won’t be in the immediate future, because SpaceX just raised new capital via a private transaction.
The most recent round of SpaceX funding was completed at the start of 2023 and included a fresh injection of $750 million that valued the company at roughly $137 billion.
That valuation closely mirrors a Bloomberg report from December 2022, which noted a total valuation of about $140 billion for SpaceX based on the fact that insiders were given the option to sell stock at $77/share during Q4 last year.
While SpaceX may be one of the most visible companies in the space sector, it’s certainly not the only one. Investors and traders interested in the space industry can also track and trade the following space-related symbols:
- Aerojet Rocketdyne Holdings (AJRD)
- ARK Space Exploration ETF (ARKX)
- Astra Space (ASTR)
- Boeing Company (BA)
- EchoStar Corp (SATS)
- Iridium Communications (IRDM)
- Lockheed Martin Corp (LMT)
- Maxar Technologies (MAXR)
- Momentus (MNTS)
- Northrop Grumman Corp (NOC)
- Planet Labs (PL)
- Procure Space ETF (UFO)
- Redwire Space (RDW)
- Rocket Lab USA (RKLB)
- SPDR S&P Kensho Final Frontiers ETF (ROKT)
- Telesat (TSAT)
- Teradyne (TER)
- Viasat (VSAT)
- Virgin Galactic (SPCE)
- Virgin Orbit (VORB)
To follow everything moving the markets in 2023—including advancements in the space industry—check out tastylive, weekdays from 7 a.m. to 4 p.m. CDT.
Sage Anderson is a pseudonym. He’s an experienced trader of equity derivatives and has managed volatility-based portfolios as a former prop trading firm employee. He’s not an employee of Luckbox, tastylive or any affiliated companies. Readers can direct questions about this blog or other trading-related subjects, to email@example.com.