How to Invest in the Space Economy | The 7investing Podcast

Things are really up in the air for the stock market. And we mean that in the most literal way possible.

Morgan Stanley predicts the Space Economy will be worth more than $1 trillion dollars by 2040. Merrill Lynch is even more optimistic, thinking it will reach $2.7 trillion by 2045.

Whatever actual number is eventually reveal, the key point is that it will likely involve a "t" in its order of magnitude. The space economy will soon become one of the largest and most important new markets that develops in our lifetime.

Once reserved for well-funded government missions, satellites in orbit now enable regional television broadcasting, the GPS used for Smartphone apps, pinpoint imagery used for logistics and government surveillance, and high-speed internet provided for locations.

Each of those opportunities will require an entire subsector as well. Launch providers like SpaceX and Rocket Lab will be needed to place the satellites into orbit. Cloud providers like Amazon Web Services and Google will store and compute all of the data they collect. Support providers like Redshift will keep the satellites operational and in good condition.

And with the FCC working through a backlog of nearly 40,000 new satellite spectrum applications, the million dollar question becomes how should we invest in the space economy?

Three of our 7investing advisors tackled that question in an exclusive conversation. Simon Erickson, Luke Hallard, and Steve Symington together hosted a livestream discussion last month, sharing insights, key themes, and plenty of space-related puns.

They first talked about defense contractors, such as how companies like Lockheed Martin were embracing collaborations and partnerships to support complex, billion-dollar government contracts. They then set their sights on launch providers, whose reusable rockets are drivign down costs and carrying larger and more sophisticated payloads for building constellations. They also discussed consolidation, especially as capital costs are increasing in a rising-rate environment and companies are finding ways to spread fixed cost across a larger number of offerings and income streams.

Steve then described Virgin Galactic's ambitions for space tourism. Even with its sister company Virgin Orbit recently filing for bankruptcy, Galactic believes space tourism will eventually be an affordable vacation for many potential tourists.

Simon then dug into defense applications, primarily in support of the escalation Russia/Ukraine war. He points to Maxar Technologies $6 billion acquisition by a private equity firm as a sign that M&A deals for mission-critical satellite operators will continue in 2023 and 2024.

Luke chimed in with a few other 'fun' space applications, such as 3D printing components for satellite repair or asteroid mining for rare minerals.

The three concluded the conversation by reaffirming their optimism for the space economy. This will take time and patience to play out, but it will also produce incredible returns for investors.

Publicly-traded companies mentioned in this interview include Alphabet, Amazon, Astroscale, Lockheed Martin, Maxar Technologies, Redwire, Rocket Lab, Virgin Galactic, and Virgin Orbit.