The New Space Race Is On: Goldman Sachs

As technology continues to advance and the costs of almost everything space-related have dropped by orders of magnitude, a 21st-Century space race is shaping up.

According to a recent report from Goldman Sachs Equity Research, space is the next frontier, and there will be plenty of money to be made by both aerospace and defense firms as this long-gestating and still nascent industry finally enters its mature phase.

As GS analyst Noah Poponak points out, “Space is becoming smaller, closer, and cheaper, reinventing an industry that has stagnated for decades and making room for new applications, technologies, and competitors.”

More on the new space race

Space Race

Poponak highlights that that space launches now cost 11 times less than they did just five years ago, and that satellites launches are as much as 100 times less. He also argues that this new accessibility is likely to transform human activities in space. Poponak says: “Low-cost launches allow for deployment of low-cost satellites with shorter life expectancies, lowering the barrier for commercial, military, and scientific space activities. Constellations of smaller satellites can now do the work of older satellites at significant cost savings. Without this high barrier to entry, the space economy may undergo an era of creative destruction. Satellite manufacturers and launch service providers must quickly respond and reinvent themselves to capitalize on what may be a high growth market.”

The next few years will also offer a plethora of satellite and launch opportunities in the aerospace and defense sectors. The decrease in launch costs is a huge opportunity for satellite manufacturers. With most costs under 10% of what they were five years ago, space investments are becoming feasible for more companies. Given that costs are almost certain to continue dropping with development of reusable rockets like the system recently successfully tested by Blue Origin. Popomak and the GS team think launch costs could fall another 10 times over the next five years.

Of note, Buy-rated LMT, Buy-rated OA, and Sell-rated BA are likely to cut back on their Antares, Atlas V and Vulcan launch costs to compete with the cheaper newcomers. Lower launch costs are transforming the satellite industry, since satellites are designed for shorter life expectancies, which lowers costs notably. GPS, satellite Internet, communications, imagery, and scientific research are all likely to grow, and at a lesser cost for consumers and taxpayers.

Space Race

The GS team project that the U.S. aerospace and defense sectors will keep up their rapid manufacturing growth trajectory and launch market share after more than decade of poor performance.

Poponak also notes that OneWeb/Virgin Galactic/Buy-rated Qualcomm Inc. and SpaceX have already announced deployment plans for 900 and 4,000-satellite fleets, respectively, with SpaceX looking to have all 4000 satellites in orbit by 2021.

Space Race

Keep in mind there were 1,261 operational satellites in orbit as of the end of 2014, based on data from the Satellite Industry Association compared to 986 in 2011. SpaceX satellites are still in R&D with no production capacity, so current satellite manufacturers like LMT, OA, BA, and Buy-rated NOC are likely to see upside from the low launch costs and the boom in satellite manufacturing. Buy-rated HRS also provides exposure to the higher growth satellite services business.

The general trend toward the privatization of space creates commercial opportunities and allows NASA to concentrate on deep space missions. This means up and comers such as OA and SpaceX are taking over transport and services to low earth orbit. A follow-on contract for NASA’s commercial resupply services program is to be awarded by January 30, 2016, and is anticipated to come to around $5 billion over six years.

Poponak is also enthusiastic about NASA’s new Space Launch System: “US-launched human spaceflight has halted since the last shuttle mission in 2011. But that is set to change with the development of the Space Launch System, the next-gen exploration class rocket, which will bring Americans to asteroids by 2025 and Mars in the 2030s. SLS projected costs of $500mn per launch along with the $18bn development program make this a compelling opportunity for manufacturers like LMT, OA, and BA.”

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  • Thomas Lee Elifritz

    Just think where America would be right now if NASA, congress and the executive office had thrown all that money at high performance methane and hydrogen propulsion like Obama originally proposed, instead of throwing it away. Heck, they could have done that with O’Keefe and Griffin way back in 2003, they were all set up for it with the Space Launch Initiative (SLI). It’s like all of America has be struck dumb. Now, basically, we have to start all over again from scratch. If they were going to have a jobs program, cryogenic propulsion would have at least accompished something. Not in America.

  • buzzlighting

    Remember Constellation program 2005-2011 Dumbacker and Cook manage that program so well launch suborbital Ares X-1 not real Ares 1 rocket and Orion never launch into space under that program. Now those two running SLS and Orion doesn’t give me much confidence in those 2 persons.

  • Thomas Lee Elifritz

    The types of modern Americans who write these kinds of uniformed articles are suffering greatly from the lack of a good post-Sputnik elementary technical education. They are not critical thinkers, nor are they capable of critical thinking. They don’t have it.

    That’s why we have SLS and Orion. It was cranked out by these kinds of Americans.

  • buzzlighting

    I state close estimated cost of the SLS,2 Solid Boosters,Orion, ground equipment,VAB and NASA personel support no way can it equal 500 million per launch more like 3-4 $Billion just about right true costs.

  • Thomas Lee Elifritz

    He’s a science fiction enthusiast. What did you expect?

  • buzzlighting

    SLS rocket $500 million per launch big lie from dumb bocker+ cook spread this lie. SLS core stage cost $1.5 billion each don’t include 2 solid 5 segmented rocket booster and Orion capsule $1.5 billion each. The fact SLS launches 1 every 2 years doesn’t build reliability and costs way more expensive. Another thing you have to include development costs,ground equipment, human personnel support = total $30 billion total development costs really very expensive space program.