The space sector has been one of the fastest growing sectors in the world economy over the past few years. According to a report by consulting firm McKinsey, the space industry could be worth more than $1 trillion by the end of this decade, up from $280 billion at the end of 2010 and $447 billion at the end of 2022. One of the biggest growth drivers within the industry is the emergence of firms sending satellites up in space, for tasks as varied as tracking climate change to managing daily card transactions.
Commercial space assets have been acting as revenue drivers for many space companies and governments around the world are boosting their expenditures in the industry to take advantage of these growth trends. According to Colorado-based space advocacy group Space Foundation, businesses in the space industry grew revenue to more than $420 billion at the end of 2022, up from $396 billion in the previous year. One-third of this revenue came in the form of support for space activities, such as maintenance of ground stations.
The biggest sale numbers for the space firms were the proceeds from the sale of satellite data, per the advocacy group. These proceeds accounted for nearly 39% of all commercial revenue generated by space firms in 2022. The growth figures for space firms are all the more impressive since many companies in the sector are startups, and with inflation skyrocketing and venture capital interest muted due to high interest rates, space startups managed to attract only $20 billion from Wall Street last year, a step down from a record high $47 billion in 2021.
Lesley Conn, the director of research at Space Foundation, believes that the commercial space sector is a vital part of the overall space economy. She has predicted that within five years, the market will see a real acceleration and an expansion of space and space assets. Some of the biggest space firms to monitor in this context include The Boeing Company (NYSE:BA), RTX Corporation (NYSE:RTX), and Lockheed Martin Corporation (NYSE:LMT), among others discussed in detail below.
Apart from these big space firms, certain smaller companies are leaving their mark on the industry. For example, Rocket Lab USA, Inc. (NASDAQ:RKLB), a California-based space firm, has been leading the way with rocket launches and returns. Peter Beck, the CEO of Rocket Lab USA, Inc. (NASDAQ:RKLB), recently highlighted, during the third quarter earnings call, some of the growth plans of his firm moving into 2024. He also shed light on the performance of his company during the 2023 fiscal year.
“Starting with Electron, in July, we launched a mission with several satellites for NASA and others, which was the first of the two back-to-back reusability focused missions. After successfully deploying the first Mission 7 spacecraft, Electron’s first stage was bought back to Earth and recovered from the ocean. Then we followed that up with our 40th Electron launch and even more recovery milestones, including a return for stage and thea first launch, reflowing Rutherford engine previously flown on our 26 Mission, There and Back Again. The engine performed flawlessly like a new one, completely validating our pursuit of reusability for Electron and setting us up well to refly an entire engine set as our next major reusability goal. Next, I will provide a bit of an update for Electron. Following those two successful flights, as you know, we unfortunately experienced an anomaly on our 41st Mission. It’s important to remember that up until this launch, we have had 37 successful orbital missions to place 171 satellites in orbit. And the past two years have been flawless, with a record of 20 successful missions one after the other."
Our Methodology
Space stocks that have positive analyst coverage were selected and ranked according to upside potential based on analyst price targets. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each company. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
10 Best Space Stocks to Buy According to Wall Street Analysts
A close up of a satellite in space, showing the advanced technology of communications systems.
Best Space Stocks to Buy According to Wall Street Analysts
Howmet Aerospace Inc. (NYSE:HWM) is a Pennsylvania-based firm that markets engineering solutions for the aerospace industry. On November 17, investment advisory Argus maintained a Buy rating on Howmet Aerospace Inc. (NYSE:HWM) stock and raised the price target to $58 from $54, noting the firm had faced challenges due to exposure to high input and commodity prices, but had also endured the worst of the supply-chain crisis and the outlook was now brighter as the balance sheet improved.
At the end of the third quarter of 2023, 46 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Howmet Aerospace Inc. (NYSE:HWM), compared to 49 in the preceding quarter worth $2.4 billion.
Just like The Boeing Company (NYSE:BA), RTX Corporation (NYSE:RTX), and Lockheed Martin Corporation (NYSE:LMT), Howmet Aerospace Inc. (NYSE:HWM) is one of the best space stocks to buy according to Wall Street analysts.
9. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 11
Upside Potential as of December 23: 10%
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a California-based company that makes and sells space-related products and services. On November 3, investment advisory Baird maintained an Outperform rating on Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) stock and raised the price target to $22 from $17, noting the firm had recently delivered a modest beat, supported by continued strength within the Space portfolio that continues to grow through the proprietary OpenSpace platform.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) with 6.2 million shares worth more than $94 million.
Northrop Grumman Corporation (NYSE:NOC) operates as an aerospace and defense company worldwide. On October 30, investment advisory Argus maintained a Buy rating on Northrop Grumman Corporation (NYSE:NOC) stock and raised the price target to $520 from $500, noting there was a favorable view on the firm around international revenue diversification as well as on Space Systems. The advisory added that it expected the ongoing geopolitical tensions to benefit sales and earnings for Northrop going forward.
At the end of the third quarter of 2023, 35 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Northrop Grumman Corporation (NYSE:NOC), compared to 40 in the previous quarter worth $712 million.
In addition to The Boeing Company (NYSE:BA), RTX Corporation (NYSE:RTX), and Lockheed Martin Corporation (NYSE:LMT), Northrop Grumman Corporation (NYSE:NOC) is one of the best space stocks to buy according to Wall Street analysts.
In its Q1 2023 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and Northrop Grumman Corporation (NYSE:NOC) was one of them. Here is what the fund said:
“Our other purchase was Northrop Grumman Corporation (NYSE:NOC), a US defense contractor whose stock price experienced a pullback. We like that Northrop has a larger presence than its rivals in the most favorable subcategories of the defense industry-namely, nuclear weapons, space systems, and what’s known as C4ISR (which stands for Command, Control, Communications, Computers. Intelligence, Surveillance, and Reconnaissance). C4ISR refers to digital systems that translate data picked up from different sensors-such as an incoming hypersonic missile or advancing troops-into a common format, and then escalate key information to the right people These differentiated technologies are especially relevant in a time of increased geopolitical tensions. Northrop also benefits from large barriers to entry in this stable industry, which should enable continued strong earnings and cash flow.”
Lockheed Martin Corporation (NYSE:LMT) operates as a security and aerospace firm. On October 18, investment advisory Argus maintained a Buy rating on Lockheed Martin Corporation (NYSE:LMT) stock with a price target of $510, noting that the recent weakness in the shares was a buying opportunity for investors since the business was fine, the revenue was once again growing, and the balance sheet was strong.
Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Lockheed Martin Corporation (NYSE:LMT) with 693,300 shares worth more than $283 million.
The Boeing Company (NYSE:BA) designs, develops, manufactures, sales, services, and supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch systems, and services worldwide. On December 20, investment advisory Deutsche Bank maintained a Buy rating on The Boeing Company (NYSE:BA) stock with a price target of $320, noting that based on review of public flight data, a pre-delivery Boeing flight was underway for a Chinese airline, indicating there was a higher probability that deliveries of 737 MAX jets into China could resume in the coming months.
At the end of the third quarter of 2023, 64 hedge funds in the database of Insider Monkey held stakes worth $2.9 billion in The Boeing Company (NYSE:BA), compared to 57 in the preceding quarter worth $2.1 billion.
