In recent years, investors have looked to the sky with hopes of exponential returns. Outer space has yet to be thoroughly explored or even understood, and that unknown quantity is what is so appealing to investors. Whether it is dreaming about space tourism or using the skies for free, high-speed internet, companies are racing to stake their claim in the heavens above.
Does that mean space stocks are a good investment? Potentially. Two of the three stocks on this list are blue-chip defense and aerospace titans while the other is an upstart communications company. All three of them have caught the eye of Wall Street analysts as strong buy space stocks for April. Here is why the sky is the limit when it comes to investing in Wall Street’s favorite space stocks.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is an American aerospace and defense company that was founded in 1995 following the merger of the Lockheed Corporation and Martin Marietta. With geopolitical tensions rising around the world, LMT stock has seen a slew of analyst upgrades including seven strong buy ratings in April. Lockheed Martin is currently trading nearly 10% below the average price target of $484.55.
Space is one of the four pillars that Lockheed Martin is built on. Lockheed Martin has partnered with both governments and commercial companies to build vehicles for space exploration. This includes Nasa’s Orion Spacecraft which is designed to bring humans to Mars and beyond. Lockheed Martin spacecraft have already traveled to different planets eight times, with over one million hours of spacecraft operations.
LMT’s stock might look expensive, but it’s not relative to the strength of the business. Shares are trading at just 1.7x sales and 17.8x forward earnings. Revenue growth can be slow with defense companies, although steady enough for LMT to pay out a 2.8% dividend yield.
Northrop Grumman (NOC)
Northrop Grumman (NYSE:NOC) is the eighth-largest aerospace company in the world by market cap. It is another favorite of analysts on Wall Street who have given NOC ten buy ratings for April, four of which are strong buys for this space stock. The price currently sits below the average price target of $489.74 and about 25% below the street-high price target of $615.00.
This aerospace company is best known for military vehicles like the B2 Stealth Bomber and the F-35 and F-5 fighter jets. As for space, Northrop Grumman created the award-winning James Webb space telescope and also helped to build the International Space Station and the ships involved in the Apollo moon landings.
Just as with Lockheed Martin, this stock trades at very low price multiples. Shares are trading at 1.7x sales and 18.7x forward earnings. Revenue growth also matches Lockheed Martin’s at a 5.0% CAGR over the past five years. The growth isn’t exciting, but it is enough for Northrop to pay out a 1.64% dividend yield to shareholders.
AST Spacemobile (ASTS)
AST Spacemobile (NASDAQ:ASTS) is a Texas-based satellite service provider that was founded in 2017. You wouldn’t know it by the stock’s recent performance, but Wall Street analysts have high hopes for ASTS. The current price of $2.13 is well below the average analyst target of $12.68. Even more encouraging is the five buy ratings the stock received in March.
This company is a direct competitor to firms like SpaceX brand Starlink. It aims to provide a satellite constellation network based in space to provide high-speed 5G service worldwide.
While these deals are promising, you do have to realize that AST Spacemobile is a pre-revenue company. There isn’t much to value the stock by other than the future potential of its business. Shares trade at 17.6x sales and obviously, there isn’t a price-to-earnings ratio without earnings. Still, at just $2.13 per share, AST Spacemobile has the potential to provide otherworldly returns in the future.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.