3 small value stocks from space: which ones should you buy?

How much are space stocks worth?

That question came to mind last year as I watched the shares of SPAC-sponsored space companies collapse in price. Fueled by low interest rates and lots of free government stimulus aid during the pandemic, several space stocks went “to the moon” with big dreams but little (or no) gains. But as the money dried up and the dreams faded, share prices followed.

By 2023, most of these space SPACs were trading 70%, 80%, and even 90% below their 2021 IPO price – which, to be honest, was probably overpriced. However, now that a few years have passed and these stocks have had time to grow into their valuations a bit, I think we finally have a handful worth considering as growth investments at a reasonable price.

Here are my top three prospects: Intuitive machines (LUNR), Red cable (RDW 1.22%)And Spire Global (SPIR -0.30%).

1. Intuitive machines

Tiny Intuitive Machines dominated the headlines earlier this year when its lunar lander, Odysseus, became the first privately built spacecraft to ever land on the moon. Its share price fluctuated wildly in the weeks surrounding the event, roughly tripling when the landing was first made before declining when it was revealed that Odysseus had not landed 100% upright. The crazy thing is that just four months after the event, Intuitive Machines’ stock is back at the same price it was at at the start of the year. Before The landing occurred – below $4 per share and at a valuation of less than one time the trailing sales.

Don’t get me wrong. This stock is not a sure thing. Intuitive only has about $55 million in cash and is burning $56 million per year. However, with two more lunar missions planned, revenue is expected to almost triple this year compared to 2023 and almost double again in 2025. Operating profits could also be positive next year.

At today’s valuation, I see a lot of potential in the stock and no great risk – provided the company can raise enough money to stay in business at all.

2. Redwire

Redwire is another space stock to keep an eye on. One of only a handful of space companies set to support Jeff Bezos’ Orbital Reef space station project, Redwire is a jack of all trades when it comes to building space infrastructure. In the past month alone, the company has won contracts to build the following facilities:

• Roll-Out Solar Array (ROSA) wing for European space giant Thales Alenia.
• A robotic arm for the European Space Agency’s Argonaut lunar module.
• And an air-breathing satellite for DARPA.

Financially, Redwire is slightly more expensive than Intuitive Machines at 1.4x sales (but still well below my estimate of the average valuation of unprofitable space stocks). Most attractively, Redwire is one of the first space stocks to report positive free cash flow, generating $12 million in cash over the past 12 months.

If Redwire can hold on, it could well be one of the best valued space stocks on the market, and one of the only Space stocks that don’t need to engage in dilutive equity offerings to stay solvent. As a plus for investors, Redwire is likely to be one of the easiest space stocks to value in the future.

3. Spire Global

Spire is one of a growing number of space companies specializing in analyzing data from satellite imagery. The company operates an asset-lite business model that, if it plays its cards right, could enable strong revenue growth. A recent partnership with NVIDIA Feeding Spire weather data into an Nvidia AI to train weather forecast models illustrates this potential.

(That’s true. You could almost say that Spire is now an artificial intelligence company.)

And that’s just the latest example. Spire’s revenue has already tripled in the last three years. As the company expands, analysts surveyed by S&P Global Market Intelligence predict that Spire could reach operating profitability as early as next year.

Spire doesn’t issue many press releases. Last week’s announcement of a satellite-based air traffic monitoring project (in collaboration with Thales) was the first such press release since Nvidia’s announcement over a month ago. Although the company flies somewhat under the radar, it’s actually the most expensive of the three stocks featured here, trading at 2.4 times trailing sales.

If I had to rank these three options by attractiveness, I’d say I think Redwire is the safest bet due to its strong free cash flow — putting it at No. 1 on my list. More growth-oriented investors might prefer Intuitive Machines due to its cheap valuation and potential for explosive revenue growth, but it’s No. 2 on my list.

This puts Spire Global at No. 3. The company has potential, but I consider it more of a “show me” stock at the moment.