Sector Analysis: The Space Economy - The Final Frontier for Investors?

Major players' share prices in the Space sector have rocketed this past year. Companies like AST SpaceMobile, Rocket Lab, and BlackSky are up over 125% year to date. It's clear that the visions of satellite constellations, planetary imaging and interplanetary infrastructure are catching investors' attention. But behind stratospheric gains lies a volatile mix of execution risk, breakthrough tech and speculative capital.

What is the Space Economy?

In sum, the space economy covers all economic activities derived from space-based services and infrastructure. It's a network of industries which includes satellite communications, earth observation, launch services, navigation and even emerging ventures like space tourism, asteroid mining and in-orbit manufacturing.

The industry has undergone a major transformation. As highlighted by Josef Koller (System Director at the Centre for Space Policy & Strategy), space travel decades ago was monopolised by governments with costs exceeding $30,000 per pound of payload. Nowadays, the launch of commercial launch providers and satellite deployers like SpaceX has fostered competition and innovation, and now, low-orbit launches cost as low as $2000. The Space economy has become much more accessible, but it's still extremely costly since launches are in the 10s of millions.

Industry Overview

Key Segments

Satellite Manufacturing & Operations: Building, launching, and operating communication, observation, and navigation satellites.

Launch Services: Rocket companies providing transportation to orbit.

Ground Infrastructure: Tracking stations, data processing facilities, satellite dishes.

Space Systems: Spacecraft components, in-orbit servicing, lunar landers.

Market Size & Growth

A study from the Space Foundation Press has stated that the global space economy has grown to $613 billion in 2024, with 56% coming from commercial space products and services (satellites, launch services, ground support, etc). This 7.8% YoY growth highlights the record pace the sector is facing.

There are lots of different opinions on the growth of the space economy, and it's all dependent on key drivers. However, using a base case of a 7.8% CAGR, the space economy could reach $1.3 trillion by 2035 (CAGR really depends on each subsector).

Analysts from McKinsey are more optimistic, expecting a growth of 9% CAGR, resulting in a $1.8 trillion economy.

It's safe to say that the potential doubling or tripling of market value within a decade will definitely attract speculative capital.

Key Drivers

1. Falling Launch Costs - If you refer to the graph above, launch costs have reduced by over 90% since the 1960s. Of course, this is due to technological advancements.

2. Commercial Innovation - Advances in components and software allow smaller, more capable, and affordable satellites. On the launch side, SpaceX reusable rockets like the Falcon 9 significantly lower the cost of both space access and environmental impact.

3. Diversified Investment & Applications - Private sector investment was around $0 billion in 2021, expanding into sectors like space tourism. This enthusiasm accelerates capital flows and investment demand.

4. Public & Government Engagement - There are now over 75 national space agencies, and governments fund multi-billion dollar contracts with companies like RocketLab. The US currently invests around $79 billion in its space programs, too.

Despite the billions poured into space infrastructure, profitability remains elusive for most pure-play space companies. The sector exhibits characteristics of early-stage tech: massive capital expenditure, long development cycles, and valuations based entirely on future potential rather than present earnings.

Key Players

The Biggest Player: SpaceX

Elon Musk's private company dominates the commercial space industry, so it distorts the entire sector's economics:

Valuation (Private): $350-400 billion

2024 Revenue: approx $13.1 billion (+51% from 2023) (Nasdaq)

Market Position: 95% of all US launches came from SpaceX in 2024. Starlink satellites make up approximately 65% of all active satellites in orbit.

Unique Selling Point (USP): SpaceX Starlink is a cash-generating machine with over 4 million subscribers for its internet, over 8400 operational satellites in orbit and with no signs of stoppage. Its Falcon Launches are relatively cheap, undercutting small-time players like RocketLab.

SpaceX is the leader in this space race. The only problem is that it's private. The company captures the lion's share of space economy value creation, yet remains inaccessible except through expensive private market mechanisms.

The Pure Plays: High Risk, High Reward

These publicly traded companies bet everything on space. (Most) gave spectacular returns but remained deeply unprofitable. There are various companies, so we'll focus on the some of the well-known.

AST SpaceMobile (NASDAQ: ASTS)

ASTS is building a constellation of satellites that work with existing mobile networks to eliminate dead zones. Unlike Starlink, which requires a dish, ASTS connects directly to your iPhone or Android. It's ambitious for sure, they're planning to launch the largest commercial salatites ever (220m^2).

Key milestones: Big partnerships with AT&T, Verizon + commercial prepayments. Secured spectrum rights to 45 MHz premium lower mid-band in the U.S. In 2024, they launched their first five satellites called the BlueBird, so the feasibility is there.

The Valuation Concern: Not profitable (financials below), currently trades at 2780x Price/Sales and 2440x EV/Revenue. Significantly overvalued compared to its peers like Planet Labs and Iridium.

Bull Case:

• Significant telecom validation (Verizon, AT&T) de-risks technology.

• First-mover advantage in direct-to-smartphone satellite connectivity.

• Large addressable market (5 billion people lack consistent coverage).

• Successful satellite deployments prove the technology works.

Bear Case:

• Valuation is utterly detached from fundamentals.

• SpaceX Starlink is a competitor.

• Telecom is a low-margin business. Why would satellite-based access be different?

• Massive capital requirements for a whole constellation (60+ satellites needed).

• Flawless execution.

Verdict: Betting on pure speculation. The tech is there, but can it work at such a scale?

RocketLab (NASDAQ: RKLB)

RKLB is an end-to-end space company, providing launch services and spacecraft systems. It designs and launches small/medium rockets and key satellite components. It's partially reusable 2-stage rocket, Electron, has shown its reliability. It's positioned as a SpaceX alternative.

Key Milestones: 15-16 successful Electron launches in 2024 (60% increase from 2023), with a 94% success rate. The New Neutron rocket is in development for 2026. Has multiple government contracts, including the US Space Force, US Air Force and the UK Ministry of Defence (+ more).

Valuation: Not profitable yet, EV/Revenue: 37x, Price/Sales: 52.55x. RKLB is very overvalued compared to the industry average of ~11x, ~10x, respectively.

Bull Case:

• Proven launch vehicle - their tech works.

• Revenue is growing rapidly (78% increase from 2023).

• Strong customer relationships (NASA, Defence, Commercial)

• Analysts expect profitability in 2027

Bear Case:

• They're going up against SpaceX Falcon 9, which dominates the market.

• Neutron faces significant development risk (new rocket = high failure potential).

• Still burning cash despite revenue growth.

• The launch market is winner-take-all; it's hard to compete against SpaceX's scale.

Verdict: Still expensive compared to its peers like Planet Labs, but they have proven execution, real revenue, and a diversified business. There's a lot of optimism about Neutron's success and the ability to take share from SpaceX.

Blacksky Technology Inc (NYSE: BKSY)

BlackSky operates satellites that provide high-frequency, high-resolution images combined with AI-driven analytics. BlackSky specialises in rapid tasking: customers can request pictures and receive them within hours. This tech is critical for military, intelligence, and time-sensitive commercial applications.

Technical Differentiation: Gen-3 Satellites: Ultra-resolution imagery.

• High-Frequency Monitoring: Can revisit locations up to 15 times per day

• On-Demand Tasking: Customers request specific locations at specific times

• Spectra AI Platform: Processes satellite data with computer vision and machine learning for automated change detection, object identification, and predictive analytics.

Key customers include the National Reconnaissance Office, Defence Innovation Unit, International Defence, and the US Navy. Contracts are in the multi-millions.

Valuation: Not profitable yet. Currently trading at 6.6x Price/Sales, and 6.56x EV/EBITDA.

Bull Case:

• Proven Profitability (Adjusted): Achieved positive adjusted EBITDA in 2024 of $11.6 million.

• Strong government relationships: NRO, NGA, DIU contracts provide a stable revenue base.

• AI differentiation: Spectra platform adds value beyond raw imagery.

• Defence tailwind: Geopolitical tensions driving intelligence spending.

• Analysts expect GAAP profitability in 2026.

Bear Case:

• Government dependence: 70%+ revenue from government contracts (concentration risk).

• Profitability concerns: Adjusted EBITDA profitable, but GAAP net loss still significant (-$57M in 2024).

• Capital intensity: Gen-3 constellation buildout required $60-70M capex in 2025.

• Competition: Planet Labs can also provide daily coverage, and Maxar offers higher resolution.

Verdict: It's overvalued compared to industry peers, but their edge is there. Expected profitability in the coming years is a good sign that this company is here to stay.

Some Financial Metrics

Ticker	Price	YTD Return	Market Cap	P/E	Revenue (TTM)	EBITDA	Price/Sales	FCF
ASTS	$83	295%	$18B	N/A	$5M	-$214M	2780x	Negative
RKLB	$66	160%	$25.4B	N/A	$504M	-$189M	~50x	Negative
LUNR	$12	-31.72%	$1.3B	N/A	$226M	-$58M	~4.7x	Negative
BKSY	$24	126%	$863M	N/A	$104M	-$10M	~6.5	Negative
PL	$13	224%	$4.6B	N/A	$262M	-$41M	~7.3x	$44M (ttm)
GSAT	$43	40.29%	$5.1B	N/A	$260M	$100M	~11.7x	Negative

Valuation: Are Prices Justified?

Short Answer: Absolutely not - based on fundamentals.

None of these companies is close to profitable, and most have minimal revenue relative to their valuations. The median EBITDA is profoundly negative, and the Price-to-Sales ratios exceed 500x (excluding outliers).

Traditional Valuation Says "Bubble"

• ASTS' market cap is $18 billion, and their revenues are only $5 million.

• RKLB at $25.4 billion with $504M revenue. 52x sales might seem reasonable until you realise the company is burning cash and won't be profitable until 2027 at the earliest.

For comparison:

• Tesla trades at 8-12x sales (with profits)

  Nvidia trades at ~30x sales (with massive profits)

  Most SaaS companies trade at 5-15x sales (with clear profit paths)

What Investors are Actually Pricing in

These stocks aren't valued on present fundamentals; they're pure bets on future potential:

Winner-Take-Most Dynamics: Belief that whoever succeeds first captures disproportionate value (see: SpaceX's dominance)

Strategic Value: Patents, technology, talent, and first-mover advantage, even if companies never become standalone winners.

Acquisition Targets: Belief that defence primes, telecom giants, or tech companies will acquire at premiums.

Government Contracts: NASA's Artemis program alone represents $93 billion through 2030

Narrative Over Numbers: Space captures imagination; investors pay for vision, not cash flows.

Key Risks

Execution Risks

Most of these pure players are betting heavily on their projects succeeding. Investing in space is not for the faint-hearted.

Every time a rocket explodes, satellites fail, or a lander tips over, the stock price tanks. Space is unforgiving. Perfect execution is required, and perfect execution is rare. In the past, Virgin Orbit went bankrupt after launch failures. There's a high risk in this game.

Capital Intensity

These companies will need billions more:

• ASTS needs $3-5 billion to deploy full constellation.

• Rocket Lab needs $1-2 billion for Neutron development.

• Intuitive Machines needs ongoing funding for missions.

• Planet needs capital for next-generation satellites.

SpaceX Moat

SpaceX doesn't just compete - it dominates:

• Major marekt positioning.

• Already profitable while others burn cash.

• Unlimited capital (Elon Musk's wealth + customer revenues).

• 15-year head start on reusability.

How do you compete with that? The honest answer: You probably don't. You find niches SpaceX ignores or hope for regulatory intervention.

• Direct-to-cell satellite internet: SpaceX partnered with T-Mobile for this exact service ASTS is building. SpaceX has 7,600 satellites vs. ASTS's 5. Who wins?

• Launch services: Falcon 9 is cheaper, proven, and available now. Why would customers risk Rocket Lab's unproven Neutron?

The Takeaway

Space investing is not for everyone. It requires firm conviction, high risk tolerance, long-term horizons, and the ability to watch your position drop 50-70% without panic selling.

If you believe:

• Space economy grows to $1.8T by 2035

• Multiple players can coexist despite SpaceX's dominance

• Current leaders (ASTS, RKLB, LUNR, PL) execute successfully

• Government contracts sustain companies until profitability

• Strategic acquirers will pay premiums

Then: Current valuations might be justified by 2030-2035 outcomes.

If you're sceptical:

• SpaceX monopolises most value creation

• Profitability remains elusive for 10+ years

• Execution failures mount

• Dilution erodes shareholder value

• Better opportunities exist elsewhere

Then: Current valuations are a bubble waiting to pop.

There's no doubt that the space economy isn't just hype; it's real, growing, and will be a multi-trillion-dollar industry by 2035. Valuations and volatility are extreme, but if you believe humanity's future is multi-planetary, then allocating 2-5% of your portfolio to space stocks is a reasonable bet on that future.

Disclaimer: The content provided on this website is for general information and educational purposes only. It is not intended to, and does not, constitute financial advice, investment advice, or a recommendation to engage in any financial activity. RNEquityInsights is not authorised or regulated by the Financial Conduct Authority (FCA) and does not provide regulated investment services or advice.