Stocks in the space sector deepened their declines on Thursday as the SpaceX halo fades further.
At least four space stocks — the space-exploration firm Virgin Galactic satellite firm Redwire space-infrastructure firm Intuitive Machines and the in-space transit company Momentus — have recorded 50% drops so far in June, based on FactSet data. Several others, including Planet Labs and Firefly Aerospace are down 40% or more for the month as of Thursday afternoon.
Even Rocket Lab which has seen a smattering of good news lately, has been affected by the broader space-sector pressure. Shares fell 5.5% on Thursday, contributing to a 44% decline so far in June.
SpaceX’s public launch on June 12 may have increased interest in the space industry, but it also highlighted the steep valuations associated with some space companies, according to CFRA analyst Keith Snyder. Adding to the volatility for the newly public company, SpaceX shares were down about 1% on Thursday, trading at about $153 a share, slightly above their debut price on the Nasdaq.
The analyst, who is bullish on Rocket Lab, noted that at one point the company’s shares were trading at about 100 times revenue. That kind of “insane” valuation, in Snyder’s view, used to be unheard of. It was a large part of the reason he ended up rating SpaceX’s stock a sell.
“I think there’s a little bit of kind of coming to terms with that in the space sector,” Snyder told MarketWatch. “While the growth is there, I think people are starting to realize it’s going to take more time than we thought for this industry to really take off,” and thereby to make some of these valuations justifiable.
The downturn has also slammed funds following the space industry. The Tuttle Capital Space Industry Income Blast exchange-traded fund is the worst performer, down 47% on a month-to-date basis, per FactSet data. At least five other sector ETFs have dropped at least 30% in June.
The Procure Space ETF is having its worst month in six years. The ETF is down by about 30% month to date, putting it on track to end June with a greater loss than it recorded in March 2020, when it fell 28.8% as the COVID-19 pandemic began, according to Dow Jones Market Data.
“All space ETFs are feeling the ‘investment coma’ from the pre-launch fear of missing out on SpaceX to the reality now of owning a very volatile space stock,” Micah Walter-Range, president of space consulting firm Caelus Partners and a contributor to the index behind UFO, said in an emailed statement on Wednesday.
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In the future, the sector outlook could look brighter, according to experts. However, that will likely take some time, especially as SpaceX’s stock is expected to demonstrate considerable volatility for weeks to come as insiders exit lockup periods and become able to sell their shares.
“Post [SpaceX] IPO-related volatility, we see compelling opportunities across the rapidly growing space sector,” KeyBanc analyst Michael Leshock said in a note to clients this month as he lifted his ratings on Rocket Lab and Firefly to overweight.
Leshock and others point to the growing activity stemming from NASA, which is expected to lean heavily on commercial partners for missions to the moon and other tasks. National security also remains a major opportunity for much of the sector.
“There is a significant push by the U.S. government to advance its capabilities in space,” Leshock said. “This is not optional, it is mandatory for the U.S. to maintain a leadership position in space.”