Private investment in space startups has surged, with venture capital funding reaching new heights. This influx of capital is supporting a wide range of space-related activities, from launch services to space habitats and resource extraction.
To make the most out of the space industry for investors, I think that one can bank on these three undiscovered space stocks that currently have depressed valuations. For some of these picks, analysts have some very bullish and appealing forecasts, so it could be accretive for investors to consider adding them to their portfolios.
Here are three space stocks for investors to consider.
AST SpaceMobile (ASTS)
AST SpaceMobile (NASDAQ:ASTS) aims to provide 5G connectivity to remote areas using low-earth satellites.
Recently, ASTS has made solid progress toward the commercial launch of its innovative space-based cellular broadband network. The company expects to deliver its first 5 Block 1 satellites, enabling initial nationwide service. A milestone 6-year commercial agreement was signed with AT&T (NYSE:T). These initial satellites will enable nationwide coverage in the U.S. using premium low-band spectrum.
In Q1 2024, ASTS reduced operating expenses through cost discipline while advancing key initiatives. The company ended the quarter with $212 million in cash and has access to additional liquidity under a credit facility.
In Q1 2024, ASTS reduced operating expenses through cost discipline while advancing key initiatives. The company ended the quarter with $212 million in cash and has access to additional liquidity under a credit facility. Given that ASTS is still in its early stages of development, I believe it’s one of those undiscovered space stocks.
Howmet Aerospace (HWM)
Howmet Aerospace (NYSE:HWM) specializes in producing components for aerospace and defense applications, such as jet engines and gas turbines.
The company delivered strong Q1 2024 results, with record quarterly revenue of $1.82 billion up 14% year-over-year. Unsurprisingly, this came from 23% growth in commercial aerospace. Adjusted EBITDA of $437 million rose 21% and margins expanded 150 basis points to 24%. EPS grew 36% to 57 cents
The company is benefiting from the continued recovery in air travel which is fueling demand for its jet engine and fastener products. It has strong positions on key aircraft platforms. Recent investments are adding capacity to capture market share.
HWM’s balance sheet is solid with low leverage after achieving an investment grade rating. It generated $95 million in Q1 free cash flow and returned $171 million to shareholders through buybacks and dividends. The dividend is expected to increase 40% in Q3.
Trading at 32x forward earnings, HWM’s valuation looks reasonable given the company’s growth outlook and could be one of those space stocks to buy.
Spire Global (SPIR)
Spire Global (NYSE:SPIR) provides space-based data and analytics through its constellation of nanosatellites.
The company’s first quarter 2024 results showed a solid 6% year-over-year revenue growth to $25.7 million. More impressively, Spire made significant progress towards profitability. Its non-GAAP operating loss improved 28% to ($7.0 million) and adjusted EBITDA approached breakeven at ($1.1 million). Gross margins expanded to 55%.
Spire has a large contracted revenue backlog of $195.7 million, providing good visibility. It expects Q2 revenue growth to accelerate to over 20% sequentially, positive adjusted EBITDA, and to turn free cash flow positive this summer.
Trading around 2x forward sales, SPIR’s valuation looks very attractive relative to its growth and improving fundamentals. The average analyst price target of $16.83 implies over 50% upside potential.
Space-based data and analytics could be one of the less-appreciated aspects of the space industry when compared with space tourism or defense, thus making SPIR one of those undiscovered space stocks.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.