Three Space-Related Stocks You Can Invest in with $1,000, Maintaining Your Position Indefinitely
Three Space-Related Stocks You Can Invest in with $1,000, Maintaining Your Position Indefinitely
Since the tumultuous debut of space-related stocks on the market in 2021, this journey has been as unconventional as a cosmic odyssey.
In the midst of the lockdown era, when many Americans were working from home and dabbling in day trading with their stimulus checks, a flurry of unsuccessful space companies sought to cash in by merging with already-listed special purpose acquisition companies (SPACs).
Despite the initial buzz, a majority of these stocks suffered significant losses, with prices plummeting as much as 70%, 80%, and even 90% throughout early 2023. Nevertheless, investor interest slowly began to resurface in 2024, signaling a potential resurgence.
Three intriguing space stocks that currently catch my attention are: BlackSky Technology (BKSY -3.26%), Spire Global (SPIR -2.88%), and Redwire (RDW 0.18%). While these companies have yet to turn a profit, they are currently trading at attractive valuations, hovering between two and four times their trailing sales.
Historical trends suggest that this is the "ideal" price for these nascent space enterprises. In fact, close on the heels of this analysis, Lockheed Martin publicly confirmed its acquisition of Terran Orbital for 3.3 times sales.
Although there is no guarantee of profitability for these companies, I believe that their present valuations make them a viable option for modest investment, with the aim of holding onto them until they either become profitable on their own or are acquired - perhaps indefinitely.
Let's delve into the specifics of each company:
BlackSky Technology
At a market capitalization of $338 million, BlackSky arguably boasts the most affordable stock price among these three companies. As an Earth observation business (essentially, a spy satellite company), BlackSky offers its clients "real-time space-based intelligence" by capturing images of various Earthly targets as frequently as 15 times a day.
BlackSky's primary clientele includes U.S. government agencies like the Department of Defense and the National Reconnaissance Office. In addition, the company has international customers, like the Indonesian Ministry of Defense, and corporate partners, such as Palantir.
Financially, though, BlackSky remains a small player in a vast space industry, with annual revenue of just $107 million. The company also operates with a loss of $42 million annually while consuming nearly $55 million in cash.
Despite these financial constraints, BlackSky has managed to hold onto a cash reserve of $63 million, ensuring it can stay afloat for an additional year before becoming cash-flow positive. Rapid sales growth is also expected to continue - potentially doubling by 2027 - as suggested by market analysts.
Spire Global
Another potential investment opportunity within the spy satellite industry is Spire, whose intriguing business setup warrants closer attention. Historically, Spire specialized in providing satellite-based intelligence for global shipping tracking. In November, the company agreed to sell its core business to the commodity data and analytics platform Kpler for $241 million.
With this financial windfall, Spire now has a substantial cash cushion, estimated at $170 million, and is set to pay off all of its outstanding debt. Its remaining aviation, weather, and space operation sectors, along with its constellation of over 100 satellites, pose both challenges and opportunities.
Assessing Spire's future profitability will depend on how successfully it can transform and monetize its remaining operations. With an annual burn rate of around $44 million, the company is expected to remain viable for at least four years while working toward establishing sustainable growth.
Redwire
Distinct from the imaging-based approach of BlackSky and Spire, Redwire leans into "space infrastructure," constructing objects and systems for use in space.
At a market capitalization of $800 million, Redwire ranks as the largest of these three companies. With modest annual cash burn (slightly more than $10 million in 2023), Redwire is projected to turn cash-flow positive by 2025, according to analysts. Though its current cash reserves are lower compared to BlackSky and Spire, Redwire appears to have a better shot at self-sufficiency in the near future.
In conclusion, while the profitability of these companies remains a guessing game, their attractively low valuations indicate a potential for long-term success. My personal preference leans towards Redwire's prospects, but all three companies present compelling investment opportunities.
In the realm of finance, investors looking for opportunities in the space industry might consider these Space-tech companies with attractive valuations. Despite their losses in the past, investors have shown interest once again, with BlackSky Technology, Spire Global, and Redwire being the three standout companies. While BlackSky focuses on Earth observation and boasts a smaller market capitalization, Spire has a larger cash cushion after selling its core business and Redwire ranks as the largest with a projected cash-flow positivity in 2025. Investing in these companies comes with uncertainty, but their low valuations can make them an appealing option for those interested in long-term success in the space industry, utilizing their savings or earnings from other investments in money markets or stocks.