When it comes to space launch, the more security you want, the more you can expect to pay.
United Launch Alliance, for example – the joint venture between Boeing (NYSE:BA) and Lockheed Martin (NYSE: LMT) which has always been NASA’s favorite launch contractor – has an unparalleled record of launch success, with 148 consecutive launches into orbit (through January 22)…
— Tory Bruno (@torybruno) January 22, 2022
…which went exactly where they were supposed to, “hot, straight, and normal.”
Hot, straight and normal
— Tory Bruno (@torybruno) January 21, 2022
Of course, maintaining such a reliability record doesn’t come cheap, which is why some ULA launches are costing taxpayers up to $400 million per pop (or they used to, until the CEO Tory Bruno comes to town and starts picking up a hatchet to compete with SpaceX).
And yet, for customers willing to take a little more risk, the savings could be substantial — or so NASA hopes.
More risk, less cost
In May 2021, NASA announced the creation of a “Venture class” of space missions, in which the US space agency will try to find “new small launch vehicles” that can reduce the cost for NASA to launch more ” risk-tolerant payloads”. Since the rocket is only a few million dollars and the payload isn’t much higher, if they both explode on launch it won’t trigger too much a lot of crying in Houston. They will just rebuild them both and try again.
At the time, NASA pointed out Astra spaceit is (NASDAQ: ASTR) tiny “Rocket 3”, pristine orbitit is (NASDAQ: VORB) LauncherOne aerial rocket, and rocket labit is (NASDAQ: RKLB) the workhorse Electron rocket among the vehicles he says might be suitable for the Venture Class project.
Less than a year later, NASA has just confirmed that each of these rockets – and several more – in fact fit the bill.
As the agency reported late last month, 12 separate companies, including both “established and emerging launch providers” and even “launch services aggregators and brokers” who don’t actually own their own rockets, have all qualified to compete for an indefinite set of – indefinite delivery/quantity government contracts that will be awarded over a five-year period – and could net $300 million in revenue to the winners.
The 12 companies on NASA’s shortlist for these dedicated enterprise-class acquisition and ride-sharing, or “VADR” missions include private companies:
- ABL Space Systems (a start-up rocket manufacturer that has yet to reach orbit — but already has contracts to launch payloads for both Lockheed Martin and comtoo much).
- Blue Origin (this is the space company of Amazon CEO Jeff Bezos).
- Phantom Space (founded by the same guy who ran Vector Space Systems).
- L2 Solutions LLC.
- Space of relativity.
- Spaceflight Inc.
- And SpaceX.
And listed companies too:
- Space Astra.
- Northrop Grumman (NYSE:NOC).
- Rocket laboratory.
- And Virgin Orbit.
Oh and Also United Launch Services, which according to S&P Global Market Intelligence is a subsidiary of ULA, and therefore also co-owned by Boeing and Lockheed Martin. With these two companies added to the tally, VADR is offering investors in no less than six distinct publicly traded space stocks a chance to cash in on NASA’s latest space program.
Who wins this race?
Which of these companies is most likely to win slices of NASA’s $300 million VADR pie? Luckily for investors, I’d say the odds are in favor of publicly traded prospects – Astra, Rocket Lab, Virgin Orbit, Northrop Grumman and ULA’s Boeing and Lockheed. Each of these companies has successfully implemented at least one rocket in orbit to date, and Rocket Lab, Northrop, Boeing and Lockheed in particular have all sent dozens of rockets.
SpaceX (natch – they’re arguably bigger than ULA at this point) and Spaceflight – which doesn’t actually own any rockets, but has built a decent sized company renting space on other companies’ rockets to fulfill its contracts .
As for other rocket companies, I wouldn’t necessarily exclude them. ABL, Phantom, Relativity and Blue Origin have yet to reach orbit. But if they survive long enough, all four have a good chance of making it. L2 could also win contracts as a space freight forwarder like Spaceflight, although – to be honest – I think Spaceflight kind of dominates this market niche.
And NASA also has a real incentive to help these space newcomers. In fact, the main takeaway for investors in all of the above is likely that space is getting more crowded and price competition is going to get fiercer. This will reduce the cost of space launch for NASA and for taxpayers – but it will also squeeze profit margins and likely lead to the outright bankruptcy of several space companies.
Invest cautiously and don’t be afraid to sell your losers once the winners are known.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.