The Looming Constraint of the Space Industry

Tyler Crowe (0:02)

Space stocks get thrown a curveball. Motley Fool Hidden Gems Investing starts now.

Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors, Matt Frankel and Lou Whiteman. Guys, we're going to get into space stocks today. We're going to talk about potential dividend cuts, as well as go into the mailbag. But as I said, starting at the top, let's get into space here. Space stocks have been front and center for investors as of late. Space stocks gathered a ton of attention, especially after the SpaceX IPO back in May. But I would say the enthusiasm for space started far before that, just to a lesser degree. Now, Lou, I'm going to steal one of your go-to lines here, but space is hard. And while there's a lot of promise here, the timeline when those things may materialize can come into question from time to time. And that was really laid bare recently when there was a somewhat, I wouldn't say shocking, but surprising announcement that SpaceX actually plans to retire its Falcon 9 rocket in 2028 This has been the workhorse, you could say, of the space launch industry.

Lou, guys, is the industry really ready to lose this vehicle in 2028? Like, I know there's a lot of stuff coming, but we haven't really seen a lot of progress yet.

Lou Whiteman (1:20)

But there's, I think, a big caveat on that decision, because that is assuming that SpaceX's internal successor, the Starship, is ready to take over. If it's not, there's no reason why they can't continue it. But to SpaceX eyes, the Starship is a much larger vehicle, so it's capable of bringing a lot more into orbit. So your per ton launch price goes down. So it's just like, you know, it's more efficient to have 30 people on a bus versus 30 people driving a car. So I think that that is the plan. And if it happens, it'll mean that Starship is going to script.

If Starship something goes wrong or it's not ready for primetime, I don't think you'll see the Falcon 9 retired as planned. So I do think there's at least some wiggle there. And it's kind of upside, not downside, at least in their head. But it is a huge thing for people trying to book now, looking to 2028, because you're kind of booking into an unknown.

Tyler Crowe (2:19)

Yeah, Matt, one of the things that's interesting about this too, is we're talking about shuttering a vehicle when some of the successors of it, we've talked about like New Glenn, for example, they had their accident where the basically the launch plan blew up. Neutron rocket has been slower to develop. Part of me wonders is like, is saying that it's going to shut down in 2028, just kind of a feigned response to the market?

Matt Frankel (2:48)

Yeah, I mean, just see if there are some caveats, like Elon Musk set some targets for that to happen. Like Lou said, that assumes that the Starship is going to be up and running and taking over and it assumes that they don't need it really. If they need it, it's there, it could continue, but I mean, customers can't book the spaceflights. It comes at really a terrible time. Like you said, the New Glenn rocket, it's been down since May. Vulcan was grounded in February.

And it comes at a time when launch demand is really heating up. From a space development agency, one of their program managers said recently that thousands of satellites are scheduled to launch by 2030 and there simply aren't enough vehicles to launch them. And that's given what exists in the market now. So it's not a great time to remove one of the main, the main player.

Tyler Crowe (3:40)

Immediately as an investor, we think like, who benefits, who loses out here? Like I said, we have the obvious candidates are the publicly traded companies because they very much in the forefront of like investors' mind, you know, Rocket Lab with its Neutron rockets, SpaceX, probably to a lesser degree Voyager and Firefly, some recent IPOs as well. But those are only solutions here. Like who else could be benefiting that maybe people aren't thinking about because they're not necessarily public.

Lou Whiteman (4:10)

Well, I think it's more even complicated than that because even the Neutron and what Firefly or what they're working on, that's not going to replace the Falcon 9 Those are coming in smaller. So there is a real void there that there aren't a lot of people trying to fill, to be honest, because the expenses, the complexity of it. So there's a bunch of ways this can go.