Space is hot, and New Street Research has four Buy-rated stocks to play the trend.
On Wednesday, New Street launched coverage of 10 stocks: AST SpaceMobile, Eutelsat, Iridium, Planet Labs, Rocket Lab, EchoStar, SES, Space42, Telesat, and Viasat.
New Street plans to pick up coverage of SpaceX ahead of its record-setting IPO. SpaceX plans to raise as much as $75 billion, valuing Elon Musk's rocket company at up to $2 trillion, in a midyear IPO.
"Space is the next frontier," wrote the broker, poised to capture "trillions of dollars of economic growth over the next two decades, disrupting and growing multiple terrestrial industries."
Some of those industries are telecom, with space-based systems delivering wireless service. Alphabet and SpaceX also want to put AI data centers in space. Defense applications in space will also proliferate in the coming years.
All the growth is enabled by lower costs to reach space, thanks mainly to SpaceX for pioneering reusable rockets. SpaceX's huge new Starship launch system could cut costs to reach orbit by 90% compared with its Falcon 9 rocket, which, in turn, cut costs to reach space by more than 95% compared with the Space Shuttle.
New Street's four Buy-rated stocks are: Rocket Lab, Space42, Viasat, and EchoStar.
Rocket Lab is the only Western alternative to SpaceX's dominance in launch services. Viasat and UAE-based Space42 have attractive spectrum assets. ( Wireless spectrum is the frequencies over which calls and data travel.) EchoStar has a significant stake in SpaceX as well as spectrum assets.
Satellite operators AST, SES, and Iridium are rated Hold.
Eutelsat, Planet Labs, and Telesat are rated Sell. Eutelsat and Telesat operate satellites and face competition from SpaceX's Starlink space-based broadband product. Planet Labs has an attractive Earth imaging business, but its "valuation is ahead of [its] potential," wrote New Street.
Wall Street likes New Street's Buy-rated stocks. Overall, 80% of analysts covering Rocket Lab rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 typically ranges from 55% to 60%. The average analyst price target for Rocket Lab stock is about $105. New Street's target is $150.
Rocket Lab stock closed at $124.15 on Wednesday. Shares have risen 415% over the past 12 months on strong results and optimism about the space economy. Gains left the stock trading at 111 times sales expected over the coming 12 months. The company is expected to be profitable by 2028, according to FactSet.
(New Street's target price is partly based on paying 30 times for 2030's operating profit.)
For EchoStar, 67% of analysts covering the stock rate shares Buy. The average price target is about $140. New Street's target is $161. Shares closed on Wednesday at $133.23.
And 70% of analysts covering Viasat rate shares Buy. The average price target is about $66. New Street's target is $100. Shares closed at $70.58 on Wednesday.
Only two analysts cover Space42, including New Street. Both rates share Buy. The target price is 3.60 U.A.E. Dirham. Shares recently traded at 1.60 U.A.E. Dirham.