How To Play The Outer Space Renaissance

• The total U.S. space travel market is a $40 billion annual market.
• Strained relationships with Russia and the rise of market disrupters such as SpaceX could shift the U.S. military’s space strategy.
• Deutsche Bank believes that the rise of new commercial space flight companies does not pose an immediate threat to existing market leaders.

Since the retirement of the Space Shuttle, space travel has gotten relatively few headlines. However, a new report by Deutsche Bank analyst Myles Walton looks at the big business of space travel and which companies are best-positioned to profit.

The numbers
The economics of space travel are staggering. According to Walton, the U.S. military launch market, the U.S. human space market and the U.S. military satellite market combine to make the U.S. space market a $40 billion annual market.

Since the Space Shuttle was parked, the U.S. has been paying Russia $82 million per seat for taxi rides to the space station. In addition, the U.S. military spends an estimated $20-25 billion per year on space-related programs outside of launch.

Inflection point
Walton believes that the rise of SpaceX and the instability of U.S./Russian relations are forcing an inflection point in the U.S. military’s space strategy.

“Following the retirement of the Space Shuttle and now the uncomfortable optics of paying the Russians $82M/seat for a taxi to the ISS, NASA is headlong into commercializing civil space for low earth orbot (LEO) and a push beyond LEO exploration (Orion and SLS),” Walton explains.

Who wins?
According to Walton, the biggest beneficiary of this shift in U.S. strategy will likely be SpaceX, which he sees as a market disrupter. However, Walton believes that SpaceX and other commercial space flight companies will likely be mostly creating a new market rather than taking over U.S. government contract share from current market leaders.

Deutsche Bank names The Boeing Company BA and Northrop Grumman Corporation NOC as its top two space travel stock picks.

Disclosure: the author holds no position in the stocks mentioned.