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Investing in Space: Orbital Technologies to Watch

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If you’ve been paying attention to the news cycle lately, you have most likely noticed that spy balloons have been making headlines in the past week or so. While neither atmospheric balloons nor nation-state spycraft are particularly new phenomena, we figured we would take a look at the state of things above the Kármán Line. In other words, what technology is in what type of orbit, and which companies are the purveyors of these products and services?

To paraphrase Sun Ra, the leader of the influential jazz band “Sun Ra and His Arkestra”, “Space is the Place” to be as an investor these days. With spending estimated at $366 billion in 2019, $469 billion in 2021, and at least one analyst calling for the industry to reach $1 trillion by 2040 it is clear that space has moved out of the domain of the public sector and into the private sector going forward.

Is There Anybody Out There?

While it may be hard to believe, there are still at least 2 generations of people who remember being a little surprised that neither the Russians nor Americans came face-to-face with God (or gods of any sort) once we all started traveling into space. While we found nothing in orbit of our planet (except the moon) back in the late 1950s and early 1960s that has certainly changed.

According to the United Nations Office for Outer Space Affairs, there have been 14,853 objects launched into space since 1957 with 10,517 still in orbit. According to the Union of Concerned Scientists, as of April 30, 2022, 5,465 of them are still active. It might not surprise you to hear that just under 63% of those satellites are of U.S. origin. Among those 3,434 objects, 31 are classified as Civil, 172 as Government, 237 as Military, and 2,992 as Commercial.

China is second with 541, the UK third with 486, and Russia fourth with 172. In case you are wondering, of those satellites identified as being used for Electronic Intelligence (128), roughly half are operated by the Chinese military, a third by the U.S. (mix of military and commercial), and the rest by Russia, France, Luxembourg (all commercial), and India, in order of the number of satellites.

Other classifications include Maritime Observation, Maritime Surveillance, Radio Frequency/Spectrum Monitoring, Situational Awareness (U.S. Space Force), and the straightforward sounding Surveillance courtesy of the Iranian Revolutionary Guard Corps. All in, the group counts 99 countries as having active satellites, although 53 have two or fewer.

What is interesting is that over the past few years, we have seen a huge increase in the number of launches as well as objects being deployed in orbit. Much of that increase has to do with one of the companies I’ll talk about next. This single company controls over 1,600 of the U.S. communications satellites.

Need a Lift?

Up until a few years ago, the only way to get access to this emerging market was to load up on shares of companies like Northrup Grumman (NOC), Boeing (BA), Lockheed Martin (LMT), former standalone company Rocketdyne, now Aerojet Rocketdyne Holdings (AJRD), and what ultimately became L3Harris Technologies (LHX). Another way was to invest in satellite owners like the previously public Intelsat, Iridium (IRDM), or ViaSat (VSAT). These names are still good ways to get exposure to space, but there’s so much more available to investors these days.

What happened about a decade ago and involved at least one lawsuit is that the founder of SpaceX (you may have heard of him: Elon Musk) managed to break into one of the world’s most exclusive corporate clubs, the group of companies providing rockets to the U.S. military. In doing so, he helped reduce launch costs from about $27,000 per kilogram (2.2lbs) in the 1990s to $951 per kilogram in 2020.

Elon paved the way for outsiders, and it wasn’t long before his fellow billionaires joined the party, notably Jeff Bezos’ Blue Origin and Richard Branson’s Virgin Galactic. Of these, only Virgin Galactic (SPCE) is publicly traded but you can always seek out opportunities as an accredited investor if you qualify as one at venues like Nasdaq Private Market. If you don’t have access to these types of opportunities, then it pays to look up and down the so-called vertical of this industry to see what kinds of exposure you can get.

By this, we mean while you may not be able to invest in SpaceX and Blue Origin as an unaccredited investor, what about the manufacturers and/or owners of the payloads themselves (downstream) or the component and systems manufacturers that produce the pieces that go into both the payload delivery systems and the payloads themselves? One of those companies is another Musk property, Starlink, the satellite-based internet provider, and the owner of those 1,600+ devices mentioned earlier.

In the U.S. alone, commercial satellites account for about 87% of functioning satellites currently orbiting this planet, and 74% if you expand globally.

The Players

Once you step away from the core group of rocket manufacturers you start to see companies like Maxar Technologies (MAXR), a provider of what it describes as “space-based infrastructure” which includes robotics, and information solutions to government agencies and satellite operators. Rocket Labs USA (RKLB) is another that provides services ranging from satellite components to mission operations. Other names tied closely to the development and launch of orbiting devices include Sidus Space (SIDU), Terran Orbital Corp (LLAP), and Astra Space Inc. (ASTR).

Beyond that, you then get into companies that own and operate satellite networks for the purpose of providing space-based services, like cellular network and broadcast providers Globalstar (GSAT), AST SpaceMobile (ASTS), Comtech Telecom (CMTL), and Echostar (SATS). Also included in this group are names like Planet Labs (PL), and BlackSky Technology (BKSY) which utilize their respective satellite networks to provide ongoing analysis of the planet and its activities.

Going beyond even those names, you start to see companies that provide terrestrial-based services that rely on satellite data, like Garmin (GRMN), and Trimble (TRMB). You then get into companies that use satellite technology to deliver their own products and services, like Sirius XM Holdings (SIRI), Comcast Corp (CMCSA), Dish Network (DISH) (partnered with EchoStar), and AT&T (T) (partnered with AST SpaceMobile, among others).

Putting it all Together

As you can see, there are a number of moving parts in this industry and a number of ways as an investor to get access to it. One thing we will say is that if and when you are considering space as an industry you want exposure to, remember that companies that are directly providing goods and services to the industry are your best bet to get that exposure. Names like Comcast and AT&T, while potentially good investments, will see their share prices affected more by events outside of the space industry than from within. In the interim, if you want to take a look at what satellites are close to you, this map should prove interesting.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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