November 1, 2024
This Space Laser Leader Just Beat the S&P by 4x
Dear Subscriber,
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| By Michael A. Robinson |
Just weeks ago, SpaceX enjoyed lots of fanfare when it boasted the first-ever private spacewalk.
Don’t get me wrong. That was a notable achievement and deserved the accolades if for no other reason than it once again showed the potential for civilians in outer space.
But for my money, something more important was at play behind the scenes.
One of the jobs on the Polaris Dawn voyage was to test the laser communications that its space-based Starlink internet service is now using to connect its constellation of satellites.
This isn’t just some cool tech SpaceX is showing off to dazzle the world. Straits Research says the global space-based laser communication market is now worth about $1.4 billion.
That market is also growing by more than 25% a year — and will be worth around $11 billion by 2032.
That’s why I want to let you know about a leader grabbing lots of contracts and whose stock has recently beaten the broad market by more than fourfold …
Now, it might be easy to brush all this off as fascinations from starry-eyed idealists who are excited about the New Space Race because of its promise of exploring frontiers beyond Earth.
That’s a mistake. There’s plenty of money to be made right now in the commercial aspects of it all, especially in the fast-growing use of communications satellites.
Big, established firms are investing significantly and actively deploying systems even as we speak.
And some of the biggest names in commercial and defense communications and space exploration, like NASA, are actively involved, not to mention foreign governments.
For example, Norway recently launched two satellites that are in polar orbit around the Earth since most satellites don’t cover the polar regions. This coverage is essential to Norway since much of its territory is in the Arctic Circle.
This also is a testament to how commonplace building and deploying satellites has become. Space is no longer a huge undertaking. And that means, rethinking conventional terrestrial communications technology for space.
Why Lasers?
Right now, space-to-Earth and space-to-space comms are done by radio frequencies (RF). It’s fast, but there are over 9,100 active satellites in space, a 35% increase from last year!
And that rate has been running around 30% annually for the past three years.
If you think of every satellite communicating on a specific frequency, like a radio station, that’s a lot of radio stations. And what it means is, RF is getting ever more jammed with data and comms moving around.
That’s why laser communications are becoming The Next Big Thing.
Laser comms move just as quickly as RF, but you get much more bandwidth. It’s like comparing dial-up internet to fiber optic cables.
And given the amount of data we’re going to have to move around and the growing amount of traffic — particularly secure, proprietary, real-time information — the more necessary and practical laser communications become.
Also, the recent hurricanes are another proof of concept for fast, data-rich space-based communications. Cell towers get blown down or washed away, but satellites keep on reliably beaming their services.
Fortunately, my background in emerging tech, blended with my decades of following the defense sector, has allowed me to figure out exactly what stock has the best shot at leading this exploding sector for years to come.
A Storied Leader
That’s why I wanted to tell you about the high-tech defense innovator, Northrop Grumman (NOC).
Northrop has been in the air since WWII and in space since it built some of the first satellites and the space capsule for Apollo moon missions.
It has been growing by acquisition since the end of the Cold War and now has built a significant competitive moat in the communications, cybersecurity and aerospace markets.
When it comes to converting big ideas into reality, companies and governments turn to Northrop.
Today, it builds the sixth-generation B-21 stealth bomber, cutting-edge satellites, command and control and cyber systems, as well as the solid rocket boosters for the United Launch Alliance.
The firm won the Mars sample-return contract to send a ship to Mars to retrieve the samples that have been collected by the rovers on the red planet. It also was the lead contractor on the James Webb Telescope.
So, it’s not hyperbole to say that Northrop is the pre-eminent satellite builder in the West, if not the world.
A Satellite Star
Then again,Northrop has been building its unique niche via acquisitions and partnerships for decades.
Recently, it named Mynaric AG (MYNA), a small German company laser-focused on, well, laser communications as a partner to build out its laser communications systems for satellites and other comms work.
On top of that, Northrop won a $54.7 million contract to develop satellite communications antennas for military aircraft last month.
The program is an effort to create military networks leveraging commercial space internet constellations like Starlink.
That would allow aircraft to use satellite systems to receive real time information, which frees the aircraft from depending on slower ground-based systems.
In addition, just last week the company scored a $1.8 billion federal defense satellite contract. This one involves production of two advanced early warning satellites designed to detect missile threats.
Add it all up and you can see that laser-based technology and satellite communications make for red hot trends.
And our timing here is good. Wall Street is waking up to the fact that Northrop is a great way to play the New Space Race.
The stock has gone on a tear of late. Since bottoming out on July 9, shares have gained 19.4%. By contrast the S&P 500 is up just 4.2% over the period.
That means this satellite leader beat the benchmark by more than fourfold.
It’s like I keep saying … the road to wealth is paved with tech.
Best,
Michael A. Robinson
P.S. My colleague Chris Graebe has been all over the developments going on in the space race, especially how we’re launching satellites these days.
But, just this week, he turned his attention to something else just as remarkable. I urge you to see the presentation Chris just hosted here.
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