As technology advances, humans are dedicating more time and money to space exploration than ever before.
The United States is one of the world's largest space exploration spenders, dedicating more than $60B in 2022 to space exploration. The next closest country was China, spending a fraction of this amount.
There are arguments on both sides of the spectrum regarding whether or not this is wise spending. Many believe developing satellites and robotics, sending astronauts to space, or building new telescopes to analyze the earth and universe is a waste of capital. Others, however, believe it will pay off immensely in the future.
There is also the element of "space tourism" we have seen recently, with many prolific people, including Amazon's Jeff Bezos heading into space. Many companies are planning for more extensive development of space tourism when it becomes more economically friendly to send people into space.
If you've come to this article, however, you are looking for the best Canadian space stocks to add to your portfolio and gain exposure to this industry over the long term.
Although we do not have as wide of a selection of publicly traded companies as the United States, a few stocks on the TSX can give an investor exposure to the space industry. Just know that just like investing in a nuclear energy company that is in the exploration stages, space stocks are extremely volatile right now.
Is there a space ETF?
If you're looking for a space ETF in Canada, you won't find one. However, in the United States, there are plenty to choose from. Here are a few:
- Ark Space Exploration and Innovation (ARKX)
- SPDR S&P Aerospace & Defense (XAR)
- iShares U.S. Aerospace and Defense (ITA)
- Procure Space (UFO)
What are the best Canadian space stocks to buy right now?
- MDA (TSE:MDA)
- Magellan Aerospace (TSE:MAL)
- Maxar Technologies (TSE:MAXR)
MDA is a small-cap space company that benefited from IPOing during a scorching stock market in early 2021. As a result, it was able to IPO at a near $15 share price. At the time of writing, it is trading at under $6.
However, don't let this price action discourage you from looking at the company.
MDA Ltd is a developer and manufacturer of advanced technology and services to the global space industry.
It is an international space mission partner, robotics, satellite systems, and geo-intelligence pioneer. Geographically it serves the United States, Europe, Asia, the Middle East and Others while generating critical revenue from domestic sales in Canada.
The difference between many early-stage IPOs and MDA is that MDA is profitable. It posted earnings per share of $0.03 in Fiscal 2021 and is expected to see large-scale growth in Fiscal 2023 and beyond, with earnings per share expected to come in at over $0.65 and revenue to exceed $850M.
Considering this company currently has a sub $700M market capitalization, it is certainly one that stands out. At the time of writing, it is trading at only 8.8X its expected earnings, and with a PEG of 0.08, the market is not pricing in the company's growth moving forward. It is also trading at only 0.7x its book value.
During the current bear market and overall market drawdown, many investors are currently "risk off." The thought of investing in a space stock likely doesn't seem all that attractive.
However, if you're willing to be patient, I believe this is one of the best space stocks on the Toronto Stock Exchange.
Magellan Aerospace (TSE:MAL)
Magellan Aerospace Corp supplies components to the aerospace industry, trading under the ticker symbol MAL. It has two major product groups: aerostructures and aeroengines. Its engines and parts may be applied to new aircraft or as replacement parts for existing platforms.
The company provides aftermarket support by conducting specific repairs and other maintenance services. It serves both commercial (approximately three-fourths of total sales) and defence markets.
The company has more than 60 years of experience providing solutions for suborbital, Earth orbit, and deep space missions. The company also supplies high-level satellite assembly, integration, and testing services.
Magellan isn't entirely a pure-play space stock. Although it does manufacture and service parts for spacecraft, among many other things, it is also a general supplier of aircraft parts. In fact, in 2022, it signed a multi-year contract with Lockheed Martin to supply components for the F-35 Aircraft.
Its exposure to the airline industry was also the reason the stock completely collapsed amid the COVID-19 pandemic and has struggled to recover since because of the hardships in the industry. However, this does leave an attractive opportunity for those looking at Magellan now, as it is the cheapest it's been in a while.
Trading at only 14.8 times trailing cash flows at the time of writing, this isn't a super cheap stock but not outlandishly expensive either. It is also one of the only companies in the Canadian space sector that pays a dividend, albeit a small one at a low 1% yield.
Fiscal 2022 was hard on Magellan. However, analysts are expecting a large-scale turnaround in 2023. Margins are expected to increase, with a double-digit revenue jump and a return to growing earnings.
Maxar Technologies (TSE:MAXR)
Of note, Maxar Technologies was recently proposed to be taken private by private equity investor Advent. So, there is a possibility that when you're reading this, Maxar is not available to be traded. However, I have included it on the list because buyout offers from these private companies often do not go through.
Maxar Technologies Inc is an integrated space and geospatial intelligence company with a full range of space technology solutions for commercial and government customers, including satellites, Earth imagery, geospatial data, and analytics.
Its operating segments include Earth Intelligence and Space Infrastructure.
The company has had a rocky last few years. From 2018 to the middle of 2019, the company lost more than 90% of its value. However, a post-pandemic surge in popularity caused its price to reach nearly 2018 levels. Once the euphoria settled, though, the 2022 bear market was not kind to Maxar. It lost almost half its value before Advent's private offering.
So if you want to invest in this space stock if the deal falls through, you have to have a lot of conviction and a high-risk tolerance.
We will likely see Maxar hover around the proposed price, which was a 129% premium from its share price at the time of the offer. If doubts start to creep in about the potential closing of the deal, its price could dip.
Overall, there is a strong likelihood the deal will close, and you won't be able to buy Maxar. But I'd be putting it on a watchlist if you're interested in the space sector and seeing if the deal follows through.
Overall, we don't have a crazy selection of space stocks, but we do have some
When many think of space stocks, they think of large-cap U.S. stock Northrop Grumman (NOC), Virgin Galactic (SPCE), or, even though you can't invest in it, Elon Musk's SpacEx.
Unfortunately, smaller budgets and the overall popularity of space exploration in Canada have resulted in most of the established companies being from the United States. To give you an idea of how much smaller Canada's space budget is, the Canadian Space Agency has planned spending of just $388M in 2023. NASA, on the other hand, has a budget of $25.4B in 2023.
I have little doubt the space economy is going to continue to grow. Exploration of the Moon, Mars, continued Earth observation and the overall observation of our galaxy and universe has fascinated the human race for centuries and will continue doing so moving forward.