How To Play The Outer Space Renaissance

Since the retirement of NASA's Space Shuttle fleet, space travel has received relatively few headlines. However, a new report by Deutsche Bank analyst Myles Walton looked at the big business of space travel and which companies are best positioned to profit.

The Numbers

The economics of space travel are staggering. According to Walton, the U.S. military launch market, the U.S. human space market and the U.S. military satellite market combine to make the U.S. space market a $40 billion annual market.

Since the Space Shuttle fleet was parked, the United States has been paying Russia $82 million per seat for taxi rides to the space station. In addition, the U.S. military spends an estimated $20–25 billion per year on space-related programs outside of launch.

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Inflection Point

Walton believes that the rise of SpaceX and the instability of U.S./Russian relations are forcing an inflection point in the U.S. military’s space strategy.

“Following the retirement of the Space Shuttle and now the uncomfortable optics of paying the Russians $82 million/seat for a taxi to the ISS, NASA is headlong into commercializing civil space for low earth orbit (LEO) and a push beyond LEO exploration (Orion and SLS),” Walton explained.

Who Wins?

According to Walton, the biggest beneficiary of this shift in U.S. strategy will likely be SpaceX, which he sees as a market disrupter. However, Walton believes that SpaceX and other commercial spaceflight companies will likely be mostly creating a new market rather than taking over U.S. government contract share from current market leaders.

Deutsche Bank named Boeing Co (NYSE: BA) and Northrop Grumman Corporation (NYSE: NOC) as its top two space travel stock picks.

Disclosure: The author holds no position in the stocks mentioned.

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