Space stocks are becoming more attractive by the day. As broader indices like the Standards and Practices (S&P) 500 decline, this opens up ripe opportunities for investors to scoop up shares of space stocks at a steep discount.
These companies offer great potential for those who get in early and are patient with holding them throughout the long term. Furthermore, these companies have had some company specific catalysts that sent their shares downards. Some of these catalysts were the result of short-term failures. Others can be chalked up the realities of needing sufficient capital to power space flight.
So, here are the best space stocks to buy for October.
Rocket Lab USA (RKLB)
Rocket Lab USA (NASDAQ:RKLB) is an end-to-end space company that delivers reliable and cost-effective launch services for small satellites. The company developed the Electron rocket. This is a lightweight launch vehicle designed to increase space access. Rocket Lab USA is developing the Neutron rocket. This is a reusable launch vehicle tailored for satellite mega-constellations, interplanetary missions and human spaceflight.
Earlier this year, Rocket Lab USA stock surged to a 52-week high of $7.70. They did so after successfully launching seven satellites for NASA and Spire Global. Bad news hit the company last month. Rocket Lab USA’s stock dropped after a failed rocket launch, destroying a satellite. The failure ends a streak of 19 successful launches. The failed launch is likely affecting the company’s Q3 guidance and future launch schedules.
Expecting a space company to have every launch go to plan is unrealistic. The company trades at historically low multiples for its price-to-sales and price-to-earnings ratios. Investors who are bullish on space stocks could then take this event as a buying opportunity.
Northrop Grumman Corporation (NOC)
Northrop Grumman Corporation (NYSE:NOC) is a diversified aerospace and defense technology company. NOC is involved in various projects in the space sector. This includes satellite manufacturing, space exploration technologies and providing launch vehicles and related services. Northrop Grumman’s innovation in space technology has made it a key player in the industry.
As geopolitical instabilities heat up, I expect NOC to see increased demand for its aerospace and defense technologies. For instance, the Korean Aerospace Industries awarded a contract by to Northrop Grumman Corporation to provide Airborne Laser Mine Detection System solutions for South Korea’s Korean Mine Countermeasures Helicopter program.
These factors make it one of those space stocks to buy, especially for those who want to diversify into the defense sector.
Virgin Galactic Holdings (SPCE)
Virgin Galactic (NYSE:SPCE) is a spaceflight company within the Virgin Group. It is developing commercial spacecraft and aims to provide suborbital spaceflights to space tourists. Virgin Galactic’s spacecraft offers customers a unique, multi-day experience. The experience culminates in a personal spaceflight that includes out-of-seat zero gravity and views of Earth from space.
There’s a good entry point for investors to scoop up shares of SPCE stock, too. Virgin Galactic’s stock dropped 19.5% after announcing plans to sell up to $400 million in new stock, having already sold $300 million in the past 10 months. This sale is to raise the cash needed for building more spaceplanes, which is essential for increasing revenue-generating commercial space tourism flights. The new stock sales could dilute existing shareholders’ value by a significant margin.
When new shares are issued, it dilutes existing investors and is usually followed by a proportionate drop in its stock price. The opportunity for new investors, though, is to buy these new shares at a discount.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines