The space sector saw a tough 2022 due to low investor interest in high-risk sectors and high interest rates affecting borrowing costs. 2023 has already seen a recovery, and 2024 has been hot for the sector, with $6.5 billion in investments in Q1 2024, up 33% from Q4 2023. Now is the time to pay attention to this industry again. The space economy, valued at $443.20 billion last year, is projected to grow to $916.85 billion by 2033, indicating robust financial health. Government and private investments are driving innovation, with $4 billion funneled into space companies in 2023 alone, a tenfold increase from a decade ago.
The three companies below enjoy being in a fast growing market, have recently secured strong contracts, and have healthy financials to back them up. Moreover, they are either affected by temporary headwinds or have unrealized growth potential which makes it a good time to snap it up right now.
Rocket Lab (RKLB)
Rocket Lab (NASDAQ:RKLB) was founded by former SpaceX engineers who focused the company on launching small satellites with significant cost advantages. RKLB is down over 17% YTD (year-to-date) due to a failed launch in September 2023 and postponed rocket launches
However, Rocket Lab is still a leader in the market. It has launched more rockets than other providers second only to SpaceX. Many of its competitors have already gone bankrupt, and it’s understood that space is a risky industry where failed launches are common.
Rocket Lab’s financials are still solid. Revenue was $92.77 million in Q1 2024, up 69% YOY. Losses were $44.26 million which is less than last year’s $45.62 million. Cash was $365.93 million, significantly up from $162.52 million in Q3. Rocket Lab also has a current ratio of 3.1x, which is the ratio of its assets to its debt due in one year. This means that Rocket Lab is in a strong financial position to continue operating and weather any failed launches in the future.
Overall, though Rocket Lab has seen some bad publicity due to a failed launch and postponed launches, its superior technology and market position combined with its solid financials makes it a future leader in space.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is the aerospace and defense industry leader. Its stock has changed little since the year began and traded under $435 for the early part of 2024. The stock has been stalled due to fighter jet delays and fewer orders signed for 2025 by President Biden. However, a key opportunity for the stock lies in its space sector.
Due to its long-standing relationship with the U.S. government and numerous governmental contracts, Lockheed Martin has an 18.5% market share in the space vehicle and missile manufacturing industry. In fact, it is the biggest receiver of defense contracts from the US government overall.
Lockheed Martin reported outperforming figures ending the fiscal year 2023. Revenue stood at $67.57 billion, demonstrating 2.41% YoY growth. Additionally, net income rose to $6.92 billion, showing 20.73% YoY growth. Best of all, Lockheed reported a Leveraged (free cash flow) Margin of 7.39%, beating the sector by 15.4%.
Lockheed Martin’s legacy product has been the Orion Spacecraft which started in 2006. It recently used the Orion to complete the Artemis I missions in 2023, and NASA has said that the Orion is performing better than expected. Furthermore, Lockheed Martin has been able to reduce costs significantly with each iteration. Overall, Lockheed Martin has been a successful player in space and has strong ties to the US government. Its future in space and stagnating stock price could mean it’s a good opportunity to buy.
Leidos Holdings (LDOS)
Leidos Holdings (NYSE:LDOS) is a defense and aviation research company headquartered in Virginia. The company’s stock is up 33.06% year to date due to major new contracts.
LDOS has shown steady gross profits over the past few quarters. Undeniable progress has been made since Quarter 1, 2023, when the gross profit was $495 million, to Q1 2024, at $638 million. Other factors, such as earnings-per-share, have also seen positive growth, with earnings-per-share growth from Q1 2023 to 2024 at 77%.
Recently, the company was offered a contract worth $738 million to support the US Air Force, including IT and telecommunications support. This is a massive win for Leidos as it supports the company financially while allowing it to form partnerships with the DoD, strengthening its position since 2003.
To conclude, Leidos’s financials are robust, and its contract with the US Air Force makes it a strong space stock.
On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.