5 Space Stocks to Buy Before the ARKX Launch

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5 Space Stocks to Buy Before the ARKX Launch

Bow Tie Nation! Joseph Hogue here and Nation, the space race is on! And that’s about as much of that as I can play without getting sued but let’s just say I am going to be tragically disappointed if the new Space Force doesn’t have at least one new recruit named James T. Kirk!

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Space Exploration as Trillion-dollar Frontier

But here on earth space exploration is going to be big money with everything from satellite internet providers to space tourism and defense getting involved. In fact, Ark Funds estimates that the hypersonic flight segment alone could grow to a $270 billion annual market over the next several years. That’s 2.7 million passengers paying as much as $100,000 to rocket from New York to Japan in less than three hours!

That data is from the Ark Invest Big Ideas report, a 112-page research report from Cathie Wood and the team at Ark Funds on the 15 life-changing trends they’re following.

Now I love the report, tons of research here…but not so much for suggestions on which stocks to buy. For example, the first eight pages is on deep learning and the trend in artificial intelligence that we’ll talk about today but nothing on which companies are primed to take advantage of this phenomenon.

So over the next few months, I’m going to dig deep into these 15 disruptive trends, show you that research, help you analyze it and then reveal the top stocks to buy in each!

I’ll be putting these videos into a special playlist on the channel called Ark Invest Stocks to Buy. Make sure you join the community so you don’t miss any of those videos because these are going to be the stocks you want to be in over the next decade!

Ark Focuses on 3 Major Ideas

The Ark research, and actually the upcoming ARKX Space Exploration ETF which we’ll talk about as well, focuses on three ideas with the space stocks theme. It explores the potential in global connectivity through near-orbit satellites, hypersonic travel and how falling launch costs will enable these changes. The space exploration ETF goes a bit further but these are the themes with the near-term potential highlighted in the research.

For example, launch costs have already fallen from $14,000 per kilogram in 2016 to about $2,000 per kilogram and with reusable ships, could fall to less than a few hundred which makes it feasible to send everything up from satellites to people and yes…even the USS Enterprise!

That could make low earth orbit satellites feasible and reduce latency by a factor of 20 for super-fast, inexpensive broadband, a market that could grow to $100 billion globally in the next five to ten years with annual revenues topping $40 billion.

In this video, I want to take that research, find the best segments of the space exploration theme, then use the screener on Stockcard to find five space stocks to watch as we head into the final frontier! I’ll share more of the Ark Invest research for each stock in the list and then, I’ll show you how to front-run the upcoming launch of the Ark space exploration ETF before it starts buying!

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To start our search for space stocks we can use the discover tab on Stockcard.io and there’s a couple of ways I like to use this. I can type in a topic like space and the drop-down will show me any groups of stocks in the theme like space exploration, space travel, launch services. Clicking on any of these takes me to all the stocks in that theme to start my research.

I can also just go to this featured tab and browse through the theme collections. There are some great long-term growth themes here like AI, Virtual Reality and AR, and here we find a Space Travel and Exploration group of stocks.

I’ll use that screener to narrow my list of space stocks and share some of the analysis from Stockcard.

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Perfect Time to Buy Ark Space Exploration ETF

Besides the long-term potential in the five space stocks I’ll highlight, now could be the perfect time to buy into this theme. Ark Invest filed its SEC registration for the Ark Space Exploration ETF, the ARKX, on January 13th. That means probably sometime between April to May, the fund is going to be launching and buying up a LOT of shares!

Guided by the Big Ideas report, the ARK Space Exploration ETF will focus on four categories; orbital aerospace companies that launch, make and operate platforms in orbit including satellites; Suborbital companies which will include drones, air taxis and electric aviation; Enabling technologies that allow us to do all this including AI and robotics; and Aerospace beneficiaries that will benefit from the space race including internet access, GPS and imaging.

But think about this. The smallest ARK Invest fund, the ARK Autonomous Tech ETF has $1.7 billion invested in its stocks. It holds $350 million in the largest holding and more than $100 million in each of the top 10 stocks.

5 Space Stocks to Invest

Even on an average $4 billion market cap for the five stocks I’m about to show you, that could be a significant increase in demand along with a general increase in investor sentiment when the ARKX declares its holdings.

And our first space stock is one I’m sure will be including in the Ark ETF, $1.4 billion Loral Space & Communications, ticker LORL.

Loral owns 63% of Telesat, one of the world’s largest providers of satellite services and will be merging into one company sometime in the third quarter. It also owns 56% of XTAR in a consortium with Spanish telecom companies that provides X-band satellite services to governments around the world.

Loral is the largest holding in the Procure Space ETF, ticker UFO, so it’s no stranger to investors looking for that space exploration theme.

Now the financial statements are a little funky here because the company books no revenue but reports its equity ownership in the two companies as a post-tax equity interest. Those earnings grew 15% last year to $116 million to produce a profit of $3.01 per share.

That puts the shares at about 15-times trailing earnings which isn’t too bad considering the growth this company could see over the next five years.

Virgin Galactic Holdings, ticker SPCE, is the most popular space stock and the largest of our group at a $7.25 billion market cap.

Richard Branson wants to be the Elon Musk of space stocks…which I guess so does Elon Musk, but Ark is a big investor in Tesla and I have no doubt will also be loading up on Virgin Galactic when it buys for the ARKX fund.

The company has completed three flight tests including a rocket-powered space flight with a full cabin of mission specialists and has cleared seven FAA verification reports. Virgin expanded its fleet to two ships last year and aims to offer 400 flights a year per spaceport.

Unlike the others on the list, this one is still very much pre-revenue though sales are expected to jump 17-fold next year to $88 million and then almost triple again to $250 million in 2023. It’s still a few years out from profitability but is expected to report positive earnings by 2024.

Maxar Techologies, ticker MAXR, has the broadest scope of any of the companies on our list of space stocks. The $2.75 billion company has capabilities across geospatial data, satellites, robotics and space infrastructure with any one of them potentially supporting a multi-billion market.

Maxar has large, recurring contracts with governments and companies in 70 countries including NASA, the Space Force and Palantir. Management believes it can scale from $1.9 billion in 2020 bookings to opportunities worth $25 billion-plus over the next five years.

The company booked 14% revenue growth in the most recent quarter and expects to report 24% earnings and sales growth next year to $1.15 per share earnings on $2 billion in revenue.

That puts it at about 27-times on a price-to-sales basis but more importantly, just one year out from profitability which could mean a strong boost to investor sentiment.

Iridium Communications, ticker IRDM, is the strongest player in that low-earth orbit satellite theme. The company already has 66 crosslinked satellites powering voice and data connectivity and 1.3 million subscribers.

Iridium completed a multi-year upgrade in 2019, replacing all its satellites and upgrading ground infrastructure. Besides giving it the opportunity to capitalize on a lot of these newer trends, that should also give it a couple of years of improving cash flow as capital spending moderates and sales increase.

The balance sheet is already pretty solid with $240 million in cash against $1.6 billion in debt and plenty of cash to cover current liabilities. The company is expected to post $605 million in sales this year and 7% growth to $647 million next year. Earnings are expected to turn positive next year from a loss of $0.14 per share to $0.05 a share in 2022. It’s a little pricey on a price-to-forward earnings basis but just 10-times on price-to-sales.

Kratos Defense and Security, ticker KTOS, is one of the more interesting and frankly…a little bit scary stocks in the list.

Honestly, when you look at all the tech and capabilities this company has from unmanned drone systems to space management, missile defense and microwave devices…Kratos is the tip of the spear in warfighting tech.

The company’s satellite and space segment already supports 90% of U.S. space missions and hundreds of commercial and government satellite missions.

The company is also the strongest on the list for earnings with profits expected at $0.36 a share this year and 56% growth to $0.55 per share next on 15% sales growth to $957 million. That puts it at just 3.5-times on a forward price to sales basis. Ark is already a big investor here with $130 million in shares in its ARKQ Autonomous Tech and Robotics ETF so a good bet that it will add it to the ARKX space exploration fund as well.

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