Is Astra Space Stock Ready to Launch Real Revenues?
What a catch! No, we’re not talking about our staff of MBAs. Earlier this week, Rocket Lab (RKLB) snatched a booster stage out of mid-air with a helicopter. The launch company is following the SpaceX model by developing reusable rocket boosters, which many see as the best way to make access to space cheaper and faster over the long haul. However, the test wasn’t completely successful, as the helicopter released the booster into the sea before it could bring it back to shore, because all was not quite going to plan. The moment emphasizes both the excitement and risks associated with working in space, which is why we’ve been reluctant to pull the trigger on investing in Rocket Lab, which is the leading commercial launch company outside of SpaceX.
That begs the question: Why would we consider investing in any other rocket company, even one as highly touted as Astra Space (ASTR)? We’ll answer that question today.
The Public Face of NewSpace
Few tech industries in recent years have generated the kind of buzz and money as NewSpace, the term often used to refer to the new generation of commercial space companies versus the big defense contractors and the big satellites that once dominated the market. Last year, the sector raised more than $15 billion between private and public funding, according to BryceTech:
In addition, about a dozen companies went public, mostly through mergers with special purpose acquisition companies (SPACs), accounting for 28% of the total at about $4 billion of total investments. Only two of these IPOs (loosely applying the term here, since private companies merging into public ones through reverse mergers aren’t taking the traditional IPO routes) involved non-SPAC companies. One was Mynaric (MYNA), a small-cap satellite company out of Germany with an interesting story but not much going on relating to revenues. The other was Sidus Space (SIDU), an even smaller satellite-as-a-service firm that also has little meaningful revenue so far. The other 10 have all been SPACs:
Among that group are three launch companies – Astra Space, Rocket Lab, and Virgin Orbit (VORB) – that primarily target the small satellite business. Smallsats, as they’re called, accounted for 94% of spacecraft launches last year. In fact, about 69% of all the smallsats launched in the last decade have been put into space during the last two years, BryceTech reported. That’s somewhere around 3,000 smallsats. Keep in mind that about 2,000 of those are Starlink satellites from SpaceX. From that perspective, the market isn’t that big, especially since SpaceX was the launch provider for a good chunk of the other third.
The question isn’t whether the industry can sustain that launch pace but whether it can increase it enough to justify the existence of companies like Virgin Orbit and Astra Space. Today, our focus is on Astra Space stock.
Can Astra Space Stock Every Fly?
We first profiled Astra Space stock pre-merger but spent much of our time offering a free education on how to benchmark a company properly. That’s because there wasn’t much else to cover. In some ways, not much has changed. For starters, the company has yet to report any revenue, which includes its Q1-2022 results released just this week. That’s so puzzling because in its shiny investor deck, Astra Space promised revenue of $4 million and then $67 million in 2021 and 2022, respectively. Of course, we’re kidding: Few deSPACs have made good on their revenue promises to date, so it’s no surprise.
In nearly a year as a publicly traded company, Astra Space has lost 75% of its value and has yet to bring in a dime of revenues.
In theory, that should change this year. The company successfully completed its first commercial launch in March after batting only .200 over five previous launch attempts. That’s not exactly a great track record given that the business model is to launch literally hundreds of smallsats per year using non-reusable rockets. The March mission deployed 22 satellites in collaboration with Spaceflight, a Seattle-based startup that primarily offers rideshare services for payloads aboard whatever rocket has capacity – sort of like sharing an Uber into space.
Astra Space is also one of a dozen companies NASA selected for a $300 million ride-share program that’s basically an industry subsidy to build momentum in the commercial launch sector. It’s pretty much a who’s who of the rocket companies that matter most:
- ABL Space Systems of El Segundo, California
- Astra Space Inc. of Alameda, California
- Blue Origin Florida LLC of Merritt Island, Florida
- L2 Solutions LLC of Houston
- Northrop Grumman Systems Corporation of Chandler, Arizona
- Phantom Space Corporation of Tucson, Arizona
- Relativity Space Inc. of Long Beach, California
- Rocket Lab USA Inc. of Long Beach, California
- Spaceflight Inc. of Seattle
- Space Exploration Technologies Corp. (SpaceX) of Hawthorne, California
- United Launch Services LLC of Centennial, Colorado
- Virgin Orbit LLC of Long Beach, California
This pretty much sums up the competition that Astra Space is up against – and it’s one tough bracket to play in.
Products and Services
Maybe that’s why Astra Space is diversifying into other products and services outside the launch business. For instance, it paid $145 million last year to acquire satellite propulsion company Apollo Fusion, which had raised $10 million in disclosed funding prior to the acquisition. So it should start making money fulfilling orders for 61 spacecraft engines, including customer LeoStella, a joint venture between geospatial company (and former SPAC) BlackSky (BKSY) and Thales Alenia Space. LeoStella is designed to churn out satellites for large constellations of spacecraft. Investors will have to wait at least another quarter or three before getting a sense of how lucrative this new business division within Astra Space will be.
In addition to launch services and space products, Astra Space is also developing a third business unit called space services. The strategy here is to build its own smallsat constellation that customers can access for communications or to carry payloads in support of research, spying, or whatever it is people do with satellites. The company reportedly had $161 million in cash and cash equivalents at the end of the latest quarter, so there’s money to get started on that plan.
Diversification could be what saves or sinks Astra Space. The company is facing a pretty formidable field of launch competitors, and its primary business to feed on a steady diet of small potatoes (i.e., lots of launches of smallsats on small rockets) may not alone fill the belly of investors. New products and services could eventually add some meat to the Astra Space stock offering, but we’re not going to bite. We’re foodies, and there are tastier space companies to own. And when companies make promises and then don’t keep them, that’s a huge red flag.
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This aged well
Thank you Alex, indeed it did. Many of these space SPACs were making hay while the sun shined by selling a future of promises. Never a good idea to invest in a story.