Space exploration is right around the corner … progress is coming faster and faster … one stock Luke Lango likes today for playing this explosive sector
What were you doing six years ago?
Maybe your kids were still in the house, so being an on-demand parent was occupying much of your time. Or perhaps you were in that old job … or it was before the promotion. Possibly this was prior to you and your spouse tying the knot.
If you’re like me, whatever you were doing doesn’t feel all that long ago. From a big-picture perspective, six years seems like a relatively short amount of time.
That’s why I find it hard to wrap my head around the reality that six years from today, you and I could be sleeping in a space hotel.
Earlier this month, CNN Travel profiled “Voyager Station.” It’s comprised of 24 modules connected by elevator shafts that make up a rotating wheel orbiting the Earth.
Source: Orbital Assembly Corporation
It’s an actual space hotel … and it’s coming.
From CNN Travel:
… construction on the space hotel is expected to begin in 2026, and a sojourn in space could be a reality by 2027.
“We’re trying to make the public realize that this golden age of space travel is just around the corner. It’s coming. It’s coming fast,” said Blincow (the developer behind Voyager Station).
Here at InvestorPlace, we have one analyst who has been all over this budding space economy from the start — Luke Lango.
It makes sense, as Luke is our hypergrowth expert. And if there’s one sector that’s going to experience astonishing growth in the coming decades, it’s space exploration/tourism.
Here’s Luke from a recent issue of his newsletter, The Daily 10X Stock Report:
Things are moving fast here. Yes, they’re moving fast in every hypergrowth industry, hence the name “hypergrowth.” But things are moving especially fast in the Space Economy.
By 2025, rocket launches will be commonplace.
By 2030, small satellites will cover the Earth, providing everything from weather and asset-tracking data, to solar power, to space-based internet coverage.
By 2035, flying to and from space will be as easy as flying in between cities.
And by 2040, the global Space Economy will be worth more than a trillion dollars, and span everything from mining, to colonization, to tourism, to data, and everything in between.
This great Space Race 2.0 — as we like to call it here in The Daily 10X — starts now … and it represents one of the most compelling investment opportunities over the next two decades.
In today’s Digest, let’s peek over Luke’s shoulder to see one of the stocks he likes as a way to play this explosive sector.
As you’ll see, it’s not some pre-revenue, hugely speculative upstart. Luke tells us it’s “a well-established space technology company that is positioned for hypergrowth over the next decade as investment in the Space Economy accelerates.”
Let’s jump in.
***The space economy is coming to life
For newer Digest readers, Luke is our hypergrowth expert, and the analyst behind The Daily 10X, as we call it. His specialty is finding market-leading tech innovators that are pioneering explosive trends, capable of generating 10X returns for investors over the long-term.
It’s a lucrative approach to the markets. To illustrate, in just the past five years, Luke has recommended 17 different 1,000%+ gaining stocks. Most investors never enjoy even one such 10X-winner.
Returning to the opportunity today in space, in the last year we’ve seen tremendous progress made toward space exploration.
There’s been Jeff Bezos’ Blue Origin, which is focused on colonizing the solar system. There’s Elon Musk and SpaceX, developing its rocket, Starship, that is intended to carry people to Mars. And there’s Richard Branson’s Virgin Galactic, working on suborbital spaceflights for space tourists.
Progress is picking up speed. In Luke’s issue from yesterday, he highlighted some of the headlines from just the last week:
The Space Economy is coming to life.
In the past week alone:
— SpaceX announced plans to launch its newest rocket prototype, Starship. That launch is actually expected to happen later today (Monday).
— Cathie Wood and Ark Invest launched their new ARK Space Exploration & Innovation ETF (ARKX).
— NASA unveiled the Commercial LEO Destinations (CLD) project, which plans to award up to $400 million to as many as four companies to begin development on private space stations.
— Rocket Lab launched seven small satellites into Earth orbit, bringing the total number of satellites delivered to orbit by Rocket Lab to 104.
That’s all in the past week alone.
What stock does Luke like to capitalize on the Space Economy?
This is where investors need to be careful.
As Luke points out, most investment opportunities in this sector represent pre-revenue companies whose values are all tied up into future profits. That puts them at the epicenter of the recent tech sector meltdown.
Plus, anytime you’re dealing with a pre-revenue company, the risk to your capital jumps substantially. Any number of things can go wrong between pre-revenues and profitability.
But not all space companies are early-stage startups.
It turns out, the company Luke likes has been around for decades, benefiting from a key relationship with one very special customer — the U.S. government.
Back to Luke:
One simple reality about space is that one of its biggest investors and users is going to be the U.S. government.
That’s because space unlocks a whole new era of surveillance, defense, and warfare that the government deems necessary to improve the security and well-being of the United States.
Think things like aerial drones for surveillance and intelligence … satellites for asset-tracking and space-based communications … and aerial-based missile defense systems.
Those things are already being broadly used by the U.S. government — and investment in them will accelerate exponentially in the coming years as the underlying technology improves, costs come down, and putting drones and satellites in space becomes much more feasible.
Who makes all those drones and satellites?
The leader is a $3.4 billion space tech company by the name of Kratos Defense & Security Solutions (KTOS).
Luke writes that Kratos has been around since 1994. In that time, it has established a reputation as being a low-cost provider of high-performance space tech solutions for national security.
Kratos manufactures low-cost, high-performance drones, satellites, microwave electronics, missile defense systems, etc., and sells those solutions to the U.S. government and certain allies.
This has been a tailwind for growth. Luke highlights how, since 2015, revenues have grown at a steady 8% annual clip, driven mostly by gradually increasing government demand for space-based defense systems.
But this growth is about to ramp up substantially …
***The coming exploding growth trajectory for Kratos
Back to Luke:
… Kratos’ growth trajectory is kicking into overdrive right now …
The company has won multiple contracts with the U.S. Navy and Air Force over the past several months. The order backlog has ballooned to $922.2 million, while the bid and proposal pipeline now sits at $9 billion.
That’s why management is guiding for 11% revenue growth in 2021, and analysts are targeting 15% revenue growth in 2022 and 18% revenue growth in 2023.
Why the growth acceleration?
Because the government doesn’t want to get left behind in the Space Race 2.0 — so as underlying space flight technology improves to the point where we can send tons of small satellites into space every few weeks, the government will make sure a lot of those small-sats are their satellites, thereby creating a government-inspired surge in demand for the stuff that Kratos makes.
This growth acceleration comes at the same time that Kratos is worth just over $3 billion — or about 3X 2022 sales estimates.
Relative to many space tech companies, that’s an absolute steal.
It turns out that one high-profile analyst believes Kratos is a steal — Kathy Wood, the fund manager behind ARK Invest, one of the most successful investment shops in the world today.
Her new space exploration ETF gives Kratos as a 5.6% weighting, making it the third largest holding in the fund.
Wrapping up, we’re seeing a trillion-dollar industry being created from nothing. These opportunities don’t come along often. Fortunately, you’re at ground zero today.
If you’re looking for a way to invest, give Kratos a hard look.
Here’s Luke with the final word:
… with Kratos, you have a well-established company, with hypergrowth potential, and a relatively cheap valuation.
That’s a winning recipe — and it means you should put Kratos stock on your buy radar today.
Have a good evening,