October 2023 Monthly Space Stock Review + 3Q23 SPAC Earnings Reactions
Plus commentary on RTX, LMT, GD, and NOC
Hello fellow space enthusiasts! 🚀🛰️
In this month’s Space Stock Review:
📈 October Market Overview
✍️ Space Stock Performance + Valuation
🎉 Bonus: SPAC 3Q23 Earnings Reactions
Disclosure/Disclaimer: Case Closed should not be interpreted as investment advice or an investment recommendation; posts represent Case’s personal opinions only. Please do your own research before investing. Case owns shares of ASTS, PL, RKLB and SPIR at the time of this post (11/14/23).
1. MARKET COMMENTARY
Public Markets
Legacy space outperformed an otherwise gloomy stock market in October 2023 following the escalation of the Israel-Hamas conflict; notably, excluding prime defense contractors RTX (+13%), Lockheed Martin (+11%), General Dynamics (+9%) and Northrop Grumman (+7%), legacy space would have declined -2%.
Geopolitical conflict is good for certain stocks (i.e. defense contractor companies), since conflict means more demand from governments for their products and services. Defense stocks are discussed in more detail in the “Space Stock Commentary” section below.
The broader stock market struggled in October, with the S&P 500 declining for the 3rd straight month given continued investor concerns that the Federal Reserve is set to hold rates “higher for longer,” particularly in light of solid economic data in October that suggested the Fed had no reason to consider cutting rates anytime soon.
Private Markets
I won’t go into as much private market detail here, but check out these resources for a more comprehensive overview of private market trends:
Cantos on Multiple Progression (old post, but so good and so true)
What stage offers startup employees the best balance of risk and reward from joining a startup?
“2024 is going to be far worse for startup shutdowns than *anything* we’ve seen so far”
2. SPACE STOCK COMMENARY
Virgin Galactic Joins the “Negative Enterprise Value Club”
Following a -18% share price decline in October, SPCE’s enterprise value flipped negative, meaning its cash balance became greater than the sum of its market cap + debt
I interpret this as investors saying “SPCE isn’t worth more than its cash on the balance sheet.” Given the company’s latest update, I don’t think this is an unreasonable take [see more on SPCE in the ‘SPAC Earnings Reaction’ section below]
Note: Enterprise value is the total value of a company taking into account both debt and equity shareholders (enterprise value = equity + debt - cash). Normally this figure is thought of as the acquisition price of a company.
Note that existing “Negative Enterprise Valuation Club” members include Astra and Momentus…
Defense Stocks Mirror February/March 2022
It is no surprise that most of prime defense contractor stocks included in my legacy space category did well in October given the escalation of the Israel-Hamas conflict
However, I was surprised to overlay the average returns for Lockheed Martin, Northrop Grumman, Raytheon, and General Dynamics in the 1st 25 days since 10/7 vs the same stocks’ reactions in the first 100 days following the start of the Russia-Ukraine war in February 2022: returns for these defense stocks are following a similar pattern thus far (see below)
This is a trend to keep an eye on since defense stocks eventually receded following the initial reaction in 2022.
3. BONUS: SPAC 3Q23 EARNINGS REACTIONS
5 of 12 space SPACs have reported 3Q23 earnings at the time of this writing (11/12).
Below are links to my “quick take” reactions for each company’s earnings report, including an “earnings score” based on my previously discussed SPAC earnings scorecard (link).
Rocket Lab
Spire Global
BlackSky Space
Redwire Space
Virgin Galactic
