The space market has already grown to $447 billion since the start of 2023 and could grow to $1 trillion by 2030, according to figures compiled by the consulting firm McKinsey & Company. Applications, including satellite broadband, space tourism and exploration, and military and intelligence applications, are driving the rise of this novel industry.
However, new industries often result in many public companies that are not well-positioned to capitalize on the new market opportunities. New industries also bring forth many overhyped or purely speculative assets that are not worth long-term investments. Investors should dump these three space stocks before they crash.
Virgin Galactic (SPCE)
Virgin Galactic (NYSE:SPCE) aims to offer suborbital flights to paying customers but has been plagued by delays, technical issues and regulatory hurdles. The company famously IPO’d via a special acquisition corporation (SPAC) merger process in late 2019. Shares rose as much as 9.7% that day but gains began to fizzle towards the end of the trading session. Since then, those still holding Virgin Galactic’s shares have been sorely disappointed.
The space company, backed by British billionaire Richard Branson, has had a number of setbacks that have dampened hopes for any major breakthroughs in the near term. There was the postponement of its first commercial flight, which was supposed to take place in late 2022.
Total operating costs related to developing Virgin Galactic’s signature “motherships” have ballooned to $1.5 billion. Fierce competition from Blue Origin and SpaceX also jeopardizes the company’s commercialization plans. Investors would do well not to hope for Virgin Galactic stock to skyrocket anytime soon.
Rocket Lab (RKLB)
Rocket Lab (NASDAQ:RKLB) specializes in providing launching services and space systems in both the space and defense industries. Launching services help customers with small spacecraft launch into low earth orbit.
Rocket Lab’s space systems product includes its “Photon family” spacecraft which can be launched into space to gather images and other remote sensory data. The company emerged from the limelight after Russia’s invasion of Ukraine spurred demand for third-party satellite data to gather military intelligence.
However, Rocket Lab has several company-specific risks investors should know. For one, the company has to compete head-on with Elon Musk’s SpaceX, which is already dominant in the industry. Moreover, Rocket Lab derives a significant portion of its revenue from U.S. government agencies, such as the Department of Defense (DoD) and NASA. This over-reliance on government agencies puts the company at risk if those agencies decide to use another service.
Recently, the company endured a failed launch of its “Electron rocket,” which typically carries third-party spaceships to orbital space. The botched launch further undermines Rocket Lab’s future prospects. Investors looking to invest in space stocks ought to steer clear of this one.
Momentus (NASDAQ:MNTS) has hopes of providing in-space transportation and infrastructure services to swaths of companies operating satellites and other spacecraft. The space company’s Orbital Service Vehicles (“OSVs”) will provide these kinds of services.
Unfortunately, like many of these space-related companies, Momentus has faced a number of launch delays and cancellations of its planned missions due to technical and regulatory issues. What little revenue the space company generates comes from small contracts that employ the use of its Vigoride spacecraft to launch third-party satellites into orbital space.
Furthermore, Momentus is depleting cash at a rapid rate. The company’s cash balance was $160 million at the end of 2021 due to its IPO but has fallen precipitously to $21 million. These developments do not spell any good news for current investors as Momentus could move to raise capital through the equities market, thereby diluting existing shareholders. Space stock investors also haven’t much to hope for as growth catalysts for Momentus have not materialized.
On the date of publication, Tyrik Torres 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.