Five years is a long time in the space industry.
Five years ago -- almost to the day -- I wrote an article here predicting the demise of Orbital ATK's planned "OmegA" heavy lift rocket, which was designed to carry large U.S. government and military payloads into space for the Air Force's Evolved Expendable Launch Vehicle program.
Why did I see no future for OmegA? Because space company StratSpace Intelligence had just published a report warning that the number of large rockets available for spaceflight -- relative to the number of large satellites that needed launching -- was already "over capacity by about 100%." This implied that several major vehicles in this class must cease flying to bring the market back into balance.
Cue the funeral dirge music for OmegA. One month later, Northrop Grumman(NYSE: NOC) acquired Orbital ATK. And two years after that, Northrop terminated the OmegA program.
Honey, who shrunk the rocket fleet?
But the times, they are a-changing.
Five years after StratSpace penned its obituary for big rockets, SpaceNews.com is heralding a revival of this segment of the space industry. Thanks to multiple factors, the world is rapidly approaching a state of deficit in large rockets today. These factors include Russia's removal from the global space market and delays in the arrival of new heavy-lift rockets from Airbus' ArianeGroup, from Boeing and Lockheed Martin's United Launch Alliance, and from Blue Origin. There was also a massive increase in demand for large rockets to build satellite constellations such as Amazon's ballyhooed Project Kuiper.
"Almost every company that we talk to is worried about [a deficit in] medium to heavy lift," Relativity Space CEO Tim Ellis told attendees at a space conference in March. United Launch Alliance CEO Tory Bruno agrees that "for the first time in 30 years, [there's] a global shortage of launch capacity." Some CEOs have gone so far as to call the shortage "gigantic."
Crisis and opportunity
When investors see huge demand for a product paired with minimal supply, we also see an opportunity that some lucky space stock may be able to exploit.
Take Northrop, for example. Although it's lost its chance to use OmegA to fill the large rocket gap, it is working hard to bring two new rockets to market. It's partnering with Firefly Aerospace to both upgrade its Antares rocket and build an all-new "medium launch vehicle." There's still a chance that Northrop can be part of the solution to this crisis of launch capacity.
Ariane, United Launch Alliance, and Blue Origin also each have new rockets coming to market. Indeed, if things go according to plan, Ariane's Ariane 6, ULA's Vulcan Centaur, and Blue Origin's New Glenn could all begin flying before the end of this year, giving each of these companies a chance to capitalize on the surging demand for big rockets capable of launching entire constellations of satellites into orbit.
In contrast, for the small rocket crowd, I'm afraid things are not looking good right now. Already we've seen one high-profile failure with Virgin Orbit filing for Chapter 11 protection last month. Other companies in the small rocket space are struggling to find a path to profit. According to data from S&P Global Market Intelligence, even the most successful of the bunch, small rocket maker Rocket Lab, isn't expected to turn profitable before 2025.
The more things change...
At the same time, investors need to keep a close eye on SpaceX, which is accelerating work on its new Starship mega-rocket. Fully reusable, and with a launch capacity to Low Earth Orbit of more than 100 tons -- more than four times the capacity of SpaceX's Falcon 9, the most-launched rocket ship on Earth right now -- Starship is really the wild card in this race.
Already, SpaceX "rideshare" launches, bundling dozens of small satellites onto single Falcon 9 launches, have hoovered up the lion's share of smallsat launches globally. This has dramatically cut demand for individual smallsat missions that small rocket companies might otherwise have been contracted to launch. Arguably, it's a part of the reason companies like Virgin Orbit (and Rocket Lab) haven't yet been able to make a profit.
And now consider what might happen to the large rocket companies if Starship begins flying, such that each Starship launch eliminates the need for four launches by Ariane, United Launch Alliance, or Blue Origin. Consider further what happens if SpaceX follows through on its promise to charge something like $2 million per Starship launch, versus the $100 million-and-up prices charged by SpaceX's competitors.
Pretty soon, not only will these competitors be unable to compete with SpaceX on price. Pretty soon, there won't be any need for their services, and the large rocket market will be back in a state of "over capacity" once again.
Much as I'd love to see lots of companies winning the space race, from where I sit now I really only see one winner here, and one space stock to buy: SpaceX. (And here's how to buy it.)
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rich Smith has positions in Rocket Lab USA. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool recommends Lockheed Martin and Rocket Lab USA. The Motley Fool has a disclosure policy.