Introducing the Ford, FedEx, and Microsoft of Space

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Pure-play space stocks are proliferating. The businesses and business models are new and feel like the stuff of science fiction. Navigating space won’t be easy.

A framework, as well as some comparisons to existing businesses, can help investors out.

“New space” can be divided into three segments. Launch services is one. These are the companies that launch payloads into space. Satellites is another. These are the companies that have payloads on the rockets. They put many, low cost, satellites in “constellations” and beam data back to Earth. The third leg of the stool is services. As space grows the industry needs logistics providers and even garbage pickup for support.

Then there is “old space,” which is essentially launching billion-dollar equipment, on rockets costing hundreds of millions, into space for governments. That business still exists, but it isn’t a growth business. What’s more, the new-and-old space convergence is happening. NASA used a commercial company, SpaceX, to carry astronauts to the International Space Station.

Here are the publicly traded space stocks, along with a few private players, that investors should watch:

The Ford of Space 

Astra launches rockets into low Earth orbit. Investors can think of Astra a little like the

Ford Motor Company

(ticker: F) of a century ago. “You don’t need the equivalent of a Ferrari to carry a small payload to orbit, so we’re not building one,” explains the company in a news release. Astra makes simple, low cost, small rockets combining tenets of rocket engineering with the cost and assembly principles of automotive engineering. 

Astra has had some early successes, reaching low Earth orbit in December. The company believes that more than 38,000 satellites will be launched into low Earth orbit over the next decade which translates in about $100 billion in launch revenue over that span. Astra, for its part, projects $1.5 billion in annual sales by 2025. By then the company plans to launch almost a rocket a day. 

An Astra  launch will cost roughly $5 million in 2025, an order of magnitude less than even a SpaceX launch. But SpaceX rockets are larger and more powerful, with more payload capacity. A first-generation Astra rocket can launch about 100 kilograms into space. A SpaceX Falcon 9 can carry about 20 tons into low Earth orbit. 

The company is valued at about $3.2 billion based on the 261 million shares outstanding after the company completes its merger with the special purpose acquisition company, or SPAC,

Holicity

(HOL). 

The Mini SpaceX

SpaceX isn’t publicly traded, but it is valued at about $74 billion in the private market.

Rocket Lab USA is another launch services company and has the distinction of having commercial operations already established. If Astra is a mini-Ford, Rocket Lab is a mini-SpaceX. The company not only launches rockets, carrying others’ payloads into orbit, Rocket Lab can manufacture and manage their own satellites. 

The company’s rockets, named Election, have a 300-kilogram payload capacity and have successfully launched about 100 satellites into space. The Electron, like Astra rockets, are smaller than a SpaceX rocket, but Rocket Lab is reusing the first stage of its rockets, just like SpaceX. Rocket Lab is also developing its larger rocket named Neutron, which has a payload capacity of about 8 tons.  

In addition to rockets, Rocket Lab builds its Photon satellites, which the company will offer to companies looking to build satellites constellations. 

By 2025, Rocket Lab projects about $400 million in launch sales and $350 million in satellite-based sales. With that level of sales, Rocket Lab believes it will be generating about $150 million in free cash flow. Rocket Lab is merging with

Vector Acquisition

(VACQ) and with Vector stock at about $11, Rocket Lab is valued at about $5.1 billion.

Software Businesses 

Spire Global wants to be compared to a software company. “Spire is a space-based SaaS company,” says its CEO Peter Platzer. SaaS is short for software as a service. Software becomes a service when customers pay monthly or yearly fees instead of buying one-off licenses when there’s a new release or update. 

Today, Spire runs a constellation of more than 100 satellites, which collect 5 terabytes of data each day and beam it down to the company’s 70 ground antennas in 16 countries. The company processes and analyzes the data—which covers every spot on Earth 10 times a day and can be used to track ships, planes, or weather—and then sells access to customers on a subscription basis.

Spire’s constellation is made up of tiny satellites, each with multiple radio-frequency sensors, which Spire calls LEMURs, short for Low Earth Multi-Use Receiver. It’s a clever acronym, but Spire also gave them the LEMUR name because management says their satellites are about the size of one of those small primates native to Madagascar. 

The company’s 150 or so customers include maritime logistics companies that can track all their ships in real time.

Spire is valued at about $1.7 billion, based on 164 million shares outstanding after its merger with

NavSight

(NSH) closes.  

Another satellite services company about to become a publicly traded company is BlackSky, which is merging with SPAC

Osprey Technology Acquisition

(SFTW). At current Osprey prices, BlackSky is valued at about $1.5 billion.

BlackSky calls itself a geospatial intelligence company and says it can generate imagery for a tenth of the cost of traditional satellite imagery services. That’s a good number that can help give investors comfort that new space-based start-ups will have the ability to disrupt traditional data providers. 

By 2023, BlackSky plans to have 23 imaging satellites in orbit and by 2025 BlackSky projects about $550 million in sales and about $210 million in free cash flow. 

The American Tower of Space 

Spire and BlackSky are focused on Earth observation markets. Another satellite company merging with a SPAC is focusing on a completely different market: mobile phones. AST & Science is merging with

New Providence Acquisition

(NPA) in a deal valuing AST at about $2.2 billion. 

AST projects $2.6 billion in 2025 sales, along with $2.5-plus billion in free cash flow generated from 107 million subscribers . The sales and free cash flow figures are surprising, but the company estimates that it can run the network for about $65 million a year, once satellites are orbiting the Earth.  

In 2025, AST plans to have 168 satellites in the sky. Its first satellites are scheduled for orbit in 2022. 

AST isn’t necessarily planning to sell customers cellphone plans. AST will become part of the infrastructure used by, say,

AT&T

(T) to improve data coverage around the globe. Mobile network operator

Vodafone

(VOD), for instance, is an early investor in AST.  

The FedEx of Space

Eventually, all the satellite-based service providers will need some logistics and support services. There will be a lot of satellites up there. That’s where Momentus comes in. Momentus is like the

FedEx

(FDX) of space, planning to offer last-mile delivery services, placing satellites where they need to go and retrieving satellites at the end of their life. 

“If they were around tomorrow would we use them? Absolutely.” says Capella Space CEO Payam Banazadeh. They can get his satellites where he needs them faster and cheaper.  

Capella is a satellite company. It generate 3D radar images of the Earth in incredible detail. Its satellite technology can see through clouds and at night.

Down the road, Momenutus plans to build what amounts to a logistics depot in space, where spacecraft can take on fuel and parts can be stored. Momentus is “the first one building a company literally in space,” says founder Mikhail Kokorich.

Momentus is merging with SPAC Stable Road Acquisition (SRAC) and is valued at about $2.1 billion. The company projects $2 billion in sales and about $1.2 billion in free cash flow by 2025. About $1.2 billion of the $2 billion in sales will come from transport services. Another $700-plus million will come from operating satellites for others. The final $150 million will come from what the company calls “In-Orbit services,” which can include retrieval and refurbishment.   

The Microsoft of Space

Those are the new public players. But there are older, privately held, businesses that already generate sales. One of those is Planet Labs: It generates optical images of the Earth and has been doing so for years.

CEO
Will Marshall
sees more growth ahead for Planet Labs and the industry since costs for launch and data gathering are falling by orders of magnitude. He likens the changes to the shift from mainframe computers to desktop computers. “The space industry’s not as big as the computer industry, but damned well, you’re going to see some pretty big changes if you [reduce] the basic cost ingredient [by 200 times].”

The Private Players  

Planet is still private. So is Capella Space.

Astroscale and D-Orbit are two space service companies that want to do things such as satellite logistics and cleanup. The industry is “planning to launch thousands of satellites, to have thousands of satellites operating in a few orbits,” says D-Orbit CEO Luca Rossettini. That means end of life services will be a big deal. Old satellites will beceme a hazard to dozens of new constellations.

Virgin Orbit is another launch services company that might be ready to merge with a SPAC. Orbit takes rockets up in a 747, then launches them.

Old Space

Companies such as

Northrop Grumman

(NOC) and

Lockheed Martin

(LMT) are “old space.” Northrop got bigger in space in 2018, when it bought Orbital ATK for about $9 billion, or roughly two times sales.

Lockheed owns half of a launch partnership with

Boeing

(BA) called ULA and announced plans to buy

Aerojet Rocketdyne

(AJRD) for about $4.4 billion in 2020. That deal hasn’t closed yet. Aerojet is being valued at about 2 times sales as well. 

Both deals give investors a sense of what launch capabilities are worth–an important touchstone for investors looking at investing in any space start-up.  

Orbital, now part of Northrop, makes Antares rockets that can carry about 8 tonnes of payload to low Earth orbit. Aerojet makes rocket engines more than rockets. In fact, about 34% of Aerojet sales come from Lockheed. Lockheed, in its ULA joint venture, also makes the Delta series of rockets. Delta rockets are the big boys and can carry about 25 tonnes into low Earth orbit and don’t struggle to reach higher orbits, such as geosynchronous orbit, either. 

Pure-play space market capitalization is up to about $25 billion. That doesn’t include “old space.” That figure will grow from there as some companies succeed and more companies burst onto the scene.  

Write to Al Root at allen.root@dowjones.com



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