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Aug 3, 2021
[4 min Read]
Space is a fairly new industry in terms of traditional stock market exposure/risk, but in most situations it's often the newer fields and technologies that have the best asymmetrical upside for investors.
Now I've always been a fan of space and the development of aerospace technologies for my entire life, but I've also been an investor (aka degenerate gambler).
Astra and Rocket Lab are both companies that produce rockets that are/have gone public via SPAC this year. Rocket Lab will complete its merger on August 20th after an investor vote but when it does it's likely to behave the same way astra did. When Astra merged with its SPAC the price pumped hard from $10-$11 up over $15 before crashing down to $8 currently.
This is basically pure hype and the fact that investors want good exposure to the space industry. Rocket Lab is a massively undervalued company that is known as the best small satellite launch provider in the world. It uses high strength carbon fiber to build reusable rockets which can fire into very direct and specific orbits better then traditional larger providers like SpaceX. But it's biggest value comes in the fact that they are using their position as the current best and most used small sat launcher to develop medium lift rockets capable of competing directly with the SpaceX Falcon 9. They also have developed the first modular and modifiable commercial spacecraft.
Within the next two years Rocket Lab will be sending a private scientific mission to Venus to show off the capability of the worlds first commercially available and modifiable Photon spacecraft (essentially a bulky satellite for interplanetary travel) that it expects to sell to governments and universities etc around the world. Think also about the companies interested in asteroid mining which could use these too.
Astra on the other hand has a specific but great niche. They are run by former NASA people and are dedicated to the idea of simplification and scaling. They are very far along with their development of a rocket small enough to fit into a shipping container but simple enough to be mass produced. They want to be the Cessna to spaceX's 737. It's a good idea. There are plans to have an American lunar base within a decade and the Russians and Chinese have the same goal and timeline. There is a lot of support and commercial opportunities that can come from the establishment of bases like these.
See, we are at the beginning of a space race, China sent a rover with the specific design and intention of finding the best place to put a manned Martian base, as well as their deployment of a Chinese space station. This stuff is getting real spicy and the market has not factored in the tremendous growth that comes with the sheer number of people who can benefit from accessing space whether it's for colonization, mining, exploration, scientific endeavors/experimentation, or most importantly manufacturing. (When you don't worry about gravity gravity doesn't squash the thing you're 3D printing before you print the rest of the support structure).
The upside is insane and it's being overlooked because space is seen as risky and crowded and people are wary of SPACs. These two specific companies, especially Rocket Lab, fill a fantastic niche not filled by anyone else. The drive and scientific intent of their founders/CEOs are the type of exploration oriented drive that will actually propel innovation instead of just sitting and doing the bare minimum like Blue Origin, ULA, or some of the other larger standard launch providers do. Those companies are about to be disrupted on a massive scale.
Rocket Lab is trading at about $10 as Vector Acquisition but post merger we could expect a massive spike in valuation as the more wary investors pile in after the SPAC risk is over. The options are cheap as hell on both companies too. Because Astra is basically the only other new small launch provider that's public it makes sense that an increased valuation and bullish run on the price of Rocket Lab will correspond with the same investors diversifying risk into Astra as well (which is seen by investors as an equivalent small sat launcher), causing a pump.
Considering the merger vote meeting is planned for the 20th of this month, I'm surprised that IV isn't higher for Rocket Lab or Astra, but it's beginning to trend upwards as more investors decide to sink some change into the company. It's surprising to me how little coverage this stock has gotten. It's going to be a massive story when it blows up this month, but for now everyone seems to be silent. They have the technical understanding, the track record, multiple government contracts already, and the prospect of a space race all going for them, that's some deep value if I've ever seen it. I realized this opportunity not from researching the stock but from the company itself, I love space and I am a fan of following the rapid development of the industry. A whole lot of people are starting to plan businesses around space and investing big bucks, and they all need a rocket to get them there. The fact that Rocket Lab is setting itself up with the Neutron medium lift rocket to directly compete with SpaceX is alone a massive indicator of future value. SpaceX is valued over $70 billion and the current valuation of Rocket Lab is just $4 billion. That's a lot of room for growth.
$SPCE is a good play but it is a space tourism company and they still value it at $10 billion, these companies have such a broader and consistent consumer base as compared to something as risky and unfounded as space tourism, which indicates the massive undervaluation situation we have in RKLB and ASTR.
Disclaimer: I own a bunch of options that expire on 9/17 in both companies as well as more then 50 shares of each in underlying stock.
TL:DR; because of global politics and reduced costs of rockets, Rocket Lab ($RKLB) and Astra ($ASTR) are set up to become massive mid to large cap businesses tho they trade at absurdly low valuations today.