February Space Stock Review
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In this month’s Space Stock Recap:
📊 February Performance and Notable Trends
🤔 Space SPAC Return Disparity
🗣️ SPAC Performance Drivers
FEBRUARY PERFORMANCE AND NOTABLE TRENDS
In February you would have been better off buying Space SPACs versus a market ETF.
Space SPACs declined just under -1% last month (versus -23% in January), outperforming the S&P 500 (the broader market), the NASDAQ 100 (tech stocks), and the ARK Innovation ETF (non-space growth stocks).
However, February’s winner was Legacy Space, outpacing both Space SPACs and the market for the second month in a row—this month beating the S&P 500 by nearly 8ppts!
Legacy Space’s outperformance was driven by escalating tensions between Russia and Ukraine, which turned into a full-scale armed conflict on 2/24. Given that the largest constituents in my Legacy Space index are aerospace & defense conglomerates, this relative outperformance makes sense—A&D behemoths such as Northrop Grumman, Lockheed Martin, and Raytheon all saw their stocks go up >10% in February in anticipation of war. Kinda f*ck’d up that geopolitical conflict is good for these stocks, but that’s showbiz for A&D companies.
SPACE SPAC RETURN DISPARITY
In total, Space SPACs were seemingly much less volatile in February compared to January (-1% vs -23%, respectively). However, there was great disparity between individual stock performance this month, with returns as high as +26% (Velo3D) and as low as -36% (Momentus).
Space SPAC category performance (market cap-weighted) tells a similar story:
Manufacturing & Infrastructure stocks had the best performance in February at +13%, driven by Velo3D’s +26% return (and despite Momentus’ -36% return). $VLD’s market cap ($1.5B) is many times size of Momentus and Redwire’s market caps ($200M-$300M), hence $VLD driving this category’s relative outperformance.
Satellite Constellation stocks returned +1% in February.
Within the category, Other Satellite stocks saw a +10% return, as both AST SpaceMobile and Arqit Quantum were positive in February.
Earth Observation stocks on the other hand declined -8%, with all four de-SPAC’d EO stocks suffering losses this month.
Launcher stocks declined -4% in February—Astra and Virgin Orbit sustained double-digit losses, partially offset by Rocket Lab and Virgin Galactic experiencing mid-single digit gains.
SPACE SPAC PERFORMANCE DRIVERS
Let’s unpack the uneven performance of Space SPACs.
First, all Space SPACs don’t seem to have experienced the same “war bump” that Legacy Space stocks did during February. While nearly all of the Space SPACs are up >10% since the onset of the Russia-Ukraine armed conflict, this is in-line with a broader market rally from 2/23 to 2/28.
This next chart is seemingly a little chaotic, but it is helpful for examining what drove individual stock returns, and how momentum was affected by the start of the Russia-Ukraine conflict:
Performance Commentary
Launch Stocks
Astra was actually on track for positive returns before a failed launch attempt on 2/10, after which shares plummeted -26% in a single day and remained depressed ever since.
While Rocket Lab did finish the month up +6%, it was on pace for a double-digit return before shares traded in sympathy with Astra following the latter’s failed launch.
Rocket Lab had a lot of notable positive news in February—early February $RKLB momentum was due to the company’s announced plans to expand its Colorado footprint and the opening of a 3rd launch pad, while a $143M contract win on 2/24 propelled shares at the end of the month.
Virgin Galactic’s positive momentum was driven by 1) a mid-February announcement that ticket sales were opening to the public and 2) relatively positive 4Q21 earnings later in the month.
Satellite Constellation Stocks
Earth observation stocks (Planet Labs, Satellogic, BlackSky) were set for a tough month prior to the start of the Russia-Ukraine conflict, but they partly recovered due to the market rally from 2/23-2/28.
I believe the circulation of these companies’ Ukraine imagery in the press is a great opportunity to show how people on Earth can benefit from technology in space.
Additionally, heightened usage by government entities during this time suggests that these EO companies may report strong 1Q22 revenue.
Spire was up +30% early in February after pre-reporting preliminary 4Q21 results, but these gains disappeared by the end of the month. Unfortunately because Spire doesn’t capture optical imagery, it hasn’t received the same kind of public attention that the other EO companies have gotten since the end of February.
AST SpaceMobile’s strong performance was potentially driven by the 2/15 release of a video featuring the CTO of a key $ASTS partner, Vodafone, speaking to why $VOD decided to partner with $ASTS (see below).
Manufacturing & Other Stocks
Momentus’ underperformance was likely due to a few recent announcements by in-space transportation competitors:
At the end of January, established in-space transporter D-Orbit announced plans to go public via SPAC.
In early February Momentus’ launch partner, SpaceX, announced a new multi-launch contract with in-space transporter Launcher Space, expanding upon a prior launch services agreement.
These announcements matter for $MNTS because the company has yet to formally test its Vigoride transporter in space, and won’t do so until June 2022.
Redwire had a volatile month—it started February strong by FINALLY providing an update on its pending internal accounting investigation (no skeletons found in the closet thus far) and announcing preliminary 4Q results. Then $RDW sold off with the rest of the market though the middle of February. Finally it finished the month strong with the market’s rally during that time period.
Velo3D was seemingly caught up in the same “war bump” tailwinds that benefitted legacy aerospace & defense companies in February—this actually makes sense for $VLD, as A&D companies account for nearly 50% of the company’s total addressable market so $VLD would benefit from greater government defense contracting.
I am less certain about what drove Virgin Orbit and Arqit Quantum’s performance—feel free to message me with ideas!
That’s all for this month—until next time!
Disclosure/Disclaimer: Case Closed should not be interpreted as investment advice or investment recommendations; posts represent Case’s opinions only. Please do your own research before investing. Case owns shares of AST SpaceMobile and BlackSky at the time of this post, 3/6.