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Key Points
SpaceX stands to gain the most from the growing space economy because of its leadership position.
AST SpaceMobile expects to launch its satellite cellular service in early 2027.
Lockheed Martin's space segment accounts for nearly a fifth of the company's total revenue.
With high-profile launches and increased investments, the space economy appears to be entering a growth phase. And although it can be hard to put a value on space operations, Morgan Stanley (NYSE: MS) seems to think the space economy is on its way to a trillion-dollar market by 2040.
Whether the space economy hits that mark over the next 14 years remains to be seen, but there's no doubt it's growing, with runway ahead. For investors looking to hop on the train, three companies poised to benefit are Space Exploration Technologies (NASDAQ: SPCX) (also known as SpaceX), AST SpaceMobile (NASDAQ: ASTS), and Lockheed Martin (NYSE: LMT).
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How Morgan Stanley sees the space economy evolving
Looking back a decade, Morgan Stanley divided the space economy into four broad segments, and here's how much revenue they each generated:
| Segment | Revenue | Market Share |
|---|---|---|
| Ground Equipment | $113 billion | 33.33% |
| Consumer TV | $98 billion | 28.91% |
| Government | $84 billion | 24.78% |
| Other | $44 billion | 12.98% |
Data source: Morgan Stanley.
Ground equipment includes satellite dishes and GPS systems; consumer TV is traditional satellite TV services; and government covers defense spending and other manufacturing.
By 2040, when Morgan Stanley estimates the space industry will be worth $1 trillion, it sees two key categories emerging: internet and consumer broadband. If this plays out, it shows a shift toward connectivity, with the internet and consumer broadband emerging as key segments.
| Segment | Revenue | Market Share |
|---|---|---|
| Internet | $412 billion | 39.13% |
| Ground Equipment | $196 billion | 18.61% |
| Government | $181 billion | 17.19% |
| Consumer TV | $117 billion | 11.11% |
| Consumer Broadband | $95 billion | 9.02% |
| Other | $52 billion | 4.94% |
Data source: Morgan Stanley.
1. SpaceX is the marquee space company
SpaceX is arguably the most important company in the space economy. To begin, it launches more satellites, cargo, and rockets than any other space company by a wide margin. In fact, it launches more than every other space company combined.
The company is also a pioneer in developing reusable rockets, helping to reduce launch costs and shorten the time between missions. It's a competitive advantage, but developments will also lift the tide and help the broader space industry.
Rocket launches are a huge part of SpaceX's business, but one of its key moneymakers is Starlink, its satellite internet and connectivity business. If Morgan Stanley's estimates are correct and space internet and broadband become $507 billion industries, SpaceX is in a great position to capture a large share of the market.
SpaceX's stock is extremely expensive right now after its initial public offering, so it's one I'd keep an eye on but be cautious of for the time being.
2. AST SpaceMobile is aiming to revolutionize your cellular service
AST SpaceMobile isn't quite a household name like SpaceX, but it's becoming a key player in advancing satellite broadband services. Right now, it's in its early stages and still releasing its satellite foundation, but AST SpaceMobile aims to become the direct-to-device satellite cellular service. Think: cell towers in space.
Instead of reaching customers directly, AST SpaceMobile will use mobile network operators, such as AT&T and Verizon Communications, for distribution. It's a revenue-sharing agreement that instantly gives AST SpaceMobile access to millions of consumers. Its commercial service is projected to begin in 2027.
AST SpaceMobile is still an unproven company that's operating at a loss, so there's risk with the stock. However, if you're a believer in the eventual scaling of space-based broadband networks, AST SpaceMobile is a compelling choice. The stock is extremely volatile right now, so there's no need to rush and invest, but it's worth keeping an eye on.
3. Lockheed Martin has a growing space business
Lockheed Martin is best known as a defense contractor, but within that is a growing space business. It makes missile warning systems, military satellites, GPS satellites, and other vital hardware. In the first quarter, its Space segment's $3.43 billion in revenue accounted for 19% of its total revenue.
If government space spending is expected to reach $181 billion by 2040, Lockheed Martin is well-positioned to capture a sizable share as one of the government's most reliable defense contractors.
Military defense aside, Lockheed Martin was also the main contractor for NASA's Orion spacecraft, which was responsible for the famous Artemis II Mission that took astronauts farther from Earth than any human had ever gone. That shows Lockheed Martin is more than a weapons builder and could become a go-to partner for NASA going forward.
Lockheed Martin isn't a stock that's likely to experience high growth, but its dividend is routinely at least double the S&P 500 average.
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile. The Motley Fool recommends Lockheed Martin and Verizon Communications. The Motley Fool has a disclosure policy.
