Space equities experiencing market downturn today
Tampering the sugarcoating, let's get real: Space investing took a nose-dive last week.
First off, the moonlanding debacle. An unmanned Nova-C lunar lander plummeted into a crater, rolled over, and met its maker, all thanks to a shortage of sunlight for its solar cells. Ouch.
That same day, the phase eight flight test for SpaceX's Starship blew up minutes after liftoff, with the second stage (renamed by Elon Musk as just "The Ship") going rogue, losing control, and obliterating itself in a fiery explosion, scattering debris throughout the Caribbean.
It's like déjà vu, isn’t it? These disasters are eerily similar to the demises of their previous counterparts; the last Nova-C landed upside down, and the previous Starship test ended in a similarly awe-inspiring display of pyrotechnics.
Unsurprisingly, investors are having a change of heart about space stocks' risk factors. On Monday, Rocket Lab USA, Planet Labs, and AST SpaceMobile took a beating, with losses of 7.5%, 8.7%, and a devastating 9.3% respectively.
Bullish from Wall Street
Despite the gloom, there's a silver lining. Prestigious investment bank Morgan Stanley has shown confidence in Rocket Lab, bumping their price target by over 10%, to a whopping $20 a share. The rest of Rocket Lab's shares, down 15% since their earnings report and updated Neutron launch timeline, suggests that Morgan Stanley's faith can boost the share value back up by 15% in the next year.
However, as I'd argue, these successes may not fully remedy the risks associated with space flights. Despite seemingly trivial delays, building rockets and making them fly without exploding remains a precarious challenge, as recent SpaceX incidents attest. Let's not forget that perfect conditions for a launch aren't guaranteed - customers can delay, ground support systems can falter, and nature may not cooperate.
But what truly creates heartburn is the potential underestimation of risks in a few space stocks. It's true that none of Rocket Lab, Planet Labs, nor AST SpaceMobile are profitable yet, and all three are bleeding cash. Despite Rocket Lab's Optimistic revenue expectations and analysts predicting profitability next year, doubts linger regarding the accuracy of these predictions, especially considering AST SpaceMobile’s requirements for massive cash to complete their satellite fleet.
Planet Labs, on the other hand, seems to sit uneasily in the rocket chair, with no analysts willing to hazard a guess as to when it'll turn a profit, despite a stunning 80% growth over the past year, and similar gains for Rocket Lab and AST stocks.
Amid concerns about valuations and profitability, it's reasonable to assume investors are feeling the urge to sell, and today is no exception. Skepticism around value stems from past successes, and as the market matures, it's only natural for investors to reconsider whether space stocks are worth the gamble.
- In light of the recent disasters with the lunar lander and the Starship, investors are reconsidering the risks associated with space stocks.
- On Monday, Rocket Lab, Planet Labs, and AST SpaceMobile experienced significant losses, suggesting a change of heart among investors.
- Despite the optimistic revenue predictions for Rocket Lab and the belief in profitability next year, doubts remain about the accuracy of these expectations, particularly in light of AST SpaceMobile's financial requirements.
- With concerns about valuations and profitability, it's understandable that investors might be tempted to sell, even as the market matures and investors reassess the risks and rewards of investing in space stocks.
