LLAP - The 3 Most Undervalued Space Stocks to Buy Now: August 2023

2023-08-24 13:45:45 ET

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Humanity has long sought to reach the final frontier. The allure of space is unmistakable. And space stocks are now in the news.

After many years of slow progress in terms of space exploration, things are back on the upswing. Thanks to the investments of billionaires such as Elon Musk and Jeff Bezos, the industry is powering forward at arguably its fastest rate since the 1960s.

We could be on the cusp of a significant breakthrough in reaching a moon development and even going to Mars one day. In the meantime, companies are finding clever ways to make money from fields such as satellites and Earth imagery. These three undervalued space stocks to buy are set to cash in on the growing wave.

Planet Labs (PL)

Planet Labs (NYSE: PL ) is a company focused on Earth observability. Simply put, the company provides on-demand satellite images to clients such as governments, security organizations, insurance companies, and industrial firms.

There are countless applications for Earth imagery, such as tracking mining, agriculture, forestry, and shipping operations. Earth imaging can be invaluable in dealing with natural disasters. And the war in Ukraine has shown the power of satellite imagery for planning tactics and defensive maneuvers.

As Planet Labs and its rivals continue to put more satellites in the air and streamline operations, the price of images should come down. That, in turn, will unlock a larger potential addressable market as new customers can make the technology effective for their own purposes at a more accessible price point.

Planet Labs is a small firm and has yet to reach profitability. But metrics are encouraging. Last quarter saw revenues surge 31%, gross margins soared, and the company passed 900 total customers. Planet Labs has sticking power; its $376 million of cash and lack of any debt means it has plenty of money to keep operating the business as it strives to reach profitability.

Terran Orbital (LLAP)

Terran Orbital (NYSE: LLAP ) is not blessed with nearly as strong of a balance sheet as Planet Labs. That’s a big part of why LLAP stock is selling for around just $1.25 per share.

Make no mistake, Terran is a more speculative pick. But there’s the makings of a potential home run here if things go well.

That’s because Terran has a huge backer and a massive order. The key backer is defense giant Lockheed Martin (NYSE: LMT ), which pumped $100 million into the company last year and gave it a strategic cooperation agreement through 2035 to do business together.

Terran is already doing significant business, with the firm at an annualized revenue pace of more than $125 million. That’s a chunky number for a company with a market capitalization of just $220 million.

Terran also has a gigantic contract win in the shape of a $2.4 billion order from Rivada for 300 spacecraft. Rivada will pay Terran $180 million in 2023 as an initial upfront commitment toward their longer-term contract. LLAP stock should pop when that money arrives, giving investors more confidence in the firm’s trajectory.

Lockheed Martin (LMT)

A big issue with the space industry today is that it is highly speculative. Most pure-play firms have a small revenue base and have not reached profitability.

For investors wanting a blue-chip entry into the space industry, there’s Lockheed Martin. Lockheed Martin has an extensive business; it generated $11.5 billion in revenues from its space operations in 2022. That comprised more than 15% of the company’s top line. Lockheed Martin also has ventures with other space firms, such as Terran Orbital, giving it more optionality in the sector.

It doesn’t hurt that demand should also be up in Lockheed Martin’s mainline defense business. Defense contractors like Lockheed Martin should have a favorable demand backdrop in the coming years between the conflict in Ukraine and rising tensions around Taiwan and other geopolitical hotspots. And Lockheed’s space and satellites business gives it a great kicker on top of that.

On the date of publication, Ian Bezek held a LONG position in LMT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

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