Three Space Stocks To Buy As Launches Multiply
Three space stocks to buy as launches multiply give investors ways to profit from activities that literally are out of sight.
The three space stocks to buy have been recommended by experienced industry followers who are forecasting increased opportunities ahead. As wars drag out in Ukraine, Gaza and elsewhere, demand is rising for companies that support the U.S. military and its allies with weapons and equipment to defend freedom.
The three space stocks to by are benefitting from soaring demand for launch services. All three have tailwinds to motor forward. A key catalyst comes from increased military demand by the U.S. Department of Defense and countries in the North Atlantic Treaty Organization (NATO).
The commercial space recovery is seen as strong enough to cut through economic uncertainty, according to BofA Global Research. Defense spending, in particular, is necessary due to mounting geopolitical security risks, BofA added.
Three Space Stocks to Buy as Launches Multiply: Rocket Lab USA
U.S. National Defense Strategy suggests that deterrence should be the primary way to protect the homeland and that military modernization should be the main tactic to use, wrote Jason Gursky, an aerospace and defense analyst with Citigroup. The U.S. government thereby is investing in its nuclear defense capabilities, as well as conventional military planes, ships and tanks, he added.
In addition, the U.S. Department of Defense is investing in an initiative called Joint All-Domain Command and Control – whose primary mission is to reduce timelines between “sensors and shooters” to provide further “deterrence and tactical advantage,” Gursky wrote in a recent research note.
“This is being done through the proliferation of sensors across the space, land, air and sea domains and the ability to quickly analyze vast amounts of data using AI,” Gursky continued. “In our view, investments in this initiative support higher defense spending through the end of the decade, and that a rising tide will lift all boats – with most contractors benefiting from it.”
Several companies involved heavily in the space business have received “buy” recommendations from Citigroup. One Is Long Beach, California-based Rocket Lab USA, Inc. (Nasdaq: RKLB), a global launch services and space systems provider. On June 20, Rocket Lab announced it successfully launched its 50th Electron mission to deploy satellites for France-based Kinéis, an Internet-of-things (IoT) company. Rocket Lab reported that Electron has reached the milestone of 50 launches faster than any commercially developed rocket in history.
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Both Citigroup and BofA Global Research are among the investment firms that recommend Rocket Lab as a buy.
In addition, prime contractors now appear to be willing to buy dedicated launch vehicles to support internal research and development (IRAD) projects – something previously not seen in any great numbers, Gursky wrote in a recent research note.
Three Space Stocks to Buy as Launches Multiply: Lockheed Martin (NYSE: LMT)
Lockheed Martin (NYSE: LMT), a Bethesda, Maryland-based aerospace and defense company, recently received a 12-month price target of $525 and a buy recommendation from Citigroup. The company is a combination of a 1995 merger between Lockheed Corporation and Martin Marietta Materials, Inc.
In its enlarged form, Lockheed Martin focuses on defense, space, intelligence, homeland security and information technology. The company operates the key business segments such as Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.
Management recently gave guidance that margins are likely to trough in 2024 and head toward 11%-plus over time, driven largely by product mix, Citigroup wrote in a recent research note. The loss-making classified contract at Lockheed Martin’s MFC business will be a tailwind in 2025, i.e., lower forward loss charges, while the rest of the margin accretive MFC portfolio is likely to grow faster than the remainder of the company. Further, new awards across the company better reflect the current cost environment and should produce margins higher than pre-pandemic backlog, according to the research note.
Lockheed Martin recently announced it awarded privately held Firefly Aerospace with a contract for 15 launches, including options for 10 additional ones in the future. Firefly’s Alpha rocket is in a unique position with 1,000 KG of payload capacity, offering much more than Rocket Lab. Industry launch giant SpaceX has much more capacity, leaving a niche for Firefly to meet the needs of big defense contractors like Lockheed Martin for certain missions, Gursky wrote.
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Three Space Stocks to Buy as Launches Multiply: Booz Allen Hamilton
Booz Allen Hamilton (NYSE: BAH), a McLean, Virginia-based recommendation from the Chicago-based investment firm William Blair, traded up after reporting fourth-quarter revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) above consensus analysts’ estimates during late May. The dividend-paying defense stock’s management issued its fiscal 2025 guidance above consensus on the strength of its pipeline of opportunities and hiring trends offset by potential election and geopolitical disruptions.
Booz Allen’s artificial intelligence (AI) and machine learning (ML) Databricks partnership for the Advana platform has been a major growth driver, DiPalma wrote in a recent research note. The industry continues to benefit from a strong 2023 defense budget, a favorable hiring environment and wage inflation, he added.
“Headcount trends and strong bookings will likely continue to be the main drivers of revenue growth, and both are in the firm’s favor,” DiPalma wrote. “Over the past few years, Booz Allen has won elite contracts for cybersecurity (Thunderdome, CDM DEFEND, CyPrESS), data analytics (Advana, CDC DMA), artificial intelligence (EMAPS, the JAIC, Space Force remote sensing), and augmented reality (Army digital soldier, soldier as a service). We view the stock as artificial intelligence at a reasonable price (AARP) and see upside of greater than 15% over the next year.”
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