Just one problem €”speculative investing is based on a proposition of maximizing the trade’s risk/reward ratio, and, practically speaking, none of today’s blue-chip space stocks are risky enough to create the potential for a 10x investment.
But these high-risk space stocks to buy do offer 10x investment opportunities. Unlike yesterday’s crash-and-burn space stocks, offering valid value propositions with demonstrable potential and the managerial vision to make them a reality.
Rocket Lab USA (RKLB)
Rocket Lab USA’s (NASDAQ:RKLB) recent stock dilution caused consternation among retail investors €”but don’t let a short-term share price dip dissuade you from the high-risk space stock’s long-term potential. Last year, Rocket Lab had a literal record-setting year as it marked a historic launch count and bagged a $515 million contract to build and service 18 space vehicles for the U.S. government.
Rocket Lab’s strong 2023 is evident from the company’s end-of-year report, even if annual per-share losses ($0.38) were below analyst expectations. Remember, though Rocket Lab isn’t pre-revenue, the high-risk space stock is still young and growing €”circumstances which trade losses today for long-term 10x potential.
That 10x potential is evident from Rocket Lab’s existing backlog or customer order count. Its backlog more than doubled in 2023, hitting $1.04 billion compared to 2022’s $582.4 million. While you can’t immediately turn order sheets into gains, the company’s backlog offers insight into future cash flow. The company expects just below half of the total backlog to be recognized (turned into revenue) within 12 months, which could quickly offset any short-term dilutive stock losses.
Planet Labs PBC (PL)
Space-based satellite imagery is increasingly important to the defense, agricultural, and even infrastructure sectors. Planet Labs PBC (NYSE:PL) is one of the few high-risk space stocks exclusively focused on opportunity. Just this week, Planet Labs announced a significant contract with the U.S. Navy to help maritime monitoring efforts across the Pacific Ocean.
Though operational (i.e., not pre-revenue), Planet Labs’ financials aren’t ideal €”though a far cry better than some of the worst space stocks with no hope. Still, the company’s third-quarter losses ($0.13) beat analyst expectations, and the company is shockingly debt-free with $713.5 million in total assets and $387 million in current assets (marking a 2.92-4.92 current ratio, depending on your view of unearned revenue’s place in the calculation).
Concerning to Planet Labs’ future is its current cash burn, with free cash flow close to $90 million. That burn rate, if continued, will likely force Planet Labs to raise funds through equity or debt. In the current high-rate regime, an equity issuance or convertible debt option seems the most likely. However, like Rocket Lab, it could offer an opportunity for space-based investors to accumulate shares.
AST SpaceMobile (ASTS)
Like Rocket Lab USA, AST SpaceMobile’s (NASDAQ:ASTS) share price suffered this year after a dilutive share offering to raise much-needed cash. Like Rocket Lab, that dip is a temporary setback that ultimately gives investors perfect pricing to open a position or accumulate shares in this high-risk space stock. One telecom and tech reporter said that the wireless sector’s space ambitions boil down to two key competitive partnerships: AST SpaceMobile in conjunction with AT&T (NYSE:T) and T-Mobile (NASDAQ:TMUS) partnered with Starlink. Without litigating the relative merits of either partnership, one thing is clear: satellite-enabled cell service is the future, and with just a couple of options available, investors must decide which horse to back.
If you need reassurance, note that AST’s partner program spans well beyond AT&T. Google (NASDAQ:GOOG, NASDAQ:GOOGL) is also a major backer and even the U.S. government is affirming AST’s long-term potential by way of a multi-million dollar secretive contract “to perform certain tasks on the company’s space-based network.” That phrase is notable and speaks to the government’s confidence in AST’s value proposition because there is no space-based network. AST’s only satellite is its BlueWalker 3 testing model, with the first commercial launches planned for later this year.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.