Space technology is currently one of the most exciting industries. Two reasonably well-known companies in this industry are Virgin Galactic (SPCE) and Maxar Technologies (MAXR). In this article I’ll analyze which stock is a better buy today.
Virgin Galactic
Virgin Galactic is an integrated aerospace company that develops human spaceflight for private individuals and researchers. It is also involved in the manufacturing of space vehicles and its operations include commercial human spaceflight as well as flying commercial research. Further, Virgin Galactic is involved in the design, manufacturing, testing, and post-flight maintenance of spaceflight vehicles.
While SPCE stock is up 104% in the last year, it's also trading 46% below its record highs. Investors should brace for volatility in upcoming months as well, given the nature of Virgin Galactic’s business.
The company has in fact created an industry- space tourism, which did not exist even two years ago. However, according to a research report by UBS this market could touch $3 billion on an annual basis by the end of this decade. Further, the market for hypersonic travel is forecast to touch $20 billion by 2030 making Virgin Galactic a top stock to place your bets on.
In the last few months, Virgin Galactic shares have been negatively impacted due to an aborted test flight. During its Q1 earnings call, the company’s management also stated it is evaluating its next launch date and flight tests which exacerbated the sell-off.
However, the stock gained momentum last Friday after Virgin Galactic’s founder Sir Richard Branson’s Twitter video showcased the potential of the VSS Unity flight. According to Branson, space travel will soon be accessible to thousands of people increasing investor optimism in the process.
Part of an unproven industry, Virgin Galactic provides the ultimate risk-reward equation for investors. You may either see your wealth grow at an exponential rate or lose significant value going ahead.
Valued at a market cap of $8 billion, Wall Street expects the company’s sales to rise from $238,000 in 2020 to $49 million in 2022. Virgin Galactic ended Q1 with $616 million in cash and burnt $40 million in the March quarter which means it has significant leeway before the company has to raise additional capital and dilute shareholder wealth.
Maxar Technologies
Maxar Technologies is a Canadian-based company that provides earth intelligence and space infrastructure solutions in the U.S., Europe, Canada, Australia, South America, and the Middle East.
Its earth intelligence business offers earth imagery products that include orthorectified imagery, imagery base map, 3D and elevation, and information products. It also has a subscription offering called SecureWatch, which provides online access to imagery and geospatial intelligence platforms.
On the other hand, the other segment provides space-based infrastructure, robotics, sub-systems, and information solutions that include communication and imaging satellites and payloads, platforms for space exploration, and hosting instruments for earth science, satellite ground systems, and defense systems among many others.
Maxar stock was also pummeled after its Q1 results. While its total sales were up 3% year over year at $392 million, Maxar reported a net loss of $1.30 per share indicating a decline of 62.5% compared to the year-ago period.
The company explained it was impacted by a $28 million charge attributed to the Sirius-XM7 satellite program. After adjusting for the charge, its financials were in line with management estimates.
However, investors should also note that Maxar Tech has been posting a GAAP loss for several quarters in the last decade. Investors now expect the company to stage a turnaround this year and race towards profitability in the upcoming quarters. Analysts forecast Maxar’s adjusted earnings to improve from a loss per share of $0.53 in 2021 to earnings of $1.07 in 2022.
The verdict
While Virgin Galactic is a disruptor, Maxar Tech is an established player in the space technology industry. Both the companies are currently unprofitable but Virgin Galactic is forecast to increase sales at an exponential rate if its space-flight programs successfully take off.
Therefore, though it is a high risk/reward investment, we believe that Virgin Galactic is a better bet at this time for investors with a high-risk appetite.
SPCE shares were trading at $33.50 per share on Thursday morning, up $2.37 (+7.61%). Year-to-date, SPCE has gained 41.17%, versus a 12.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
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