AST SpaceMobile (ASTS), which began garnering attention following news of its contract with AT&T earlier this year, has risen more than 400% year to date and has done more than any other publicly traded commercial space company to capture the attention of the investing public.
It’s arguably prompted more investor interest in private-sector spaceflight than at any point since the “billionaire space race” between Elon Musk, Richard Branson and Amazon’s (AMZN) Jeff Bezos kicked off in earnest a little more than five years ago.
You may have noticed that I used the qualifier “publicly traded” above.
You see, the largest commercial space venture by far is Musk’s SpaceX, a privately held company. But, there’s an ongoing federal effort to diversify the pool of companies that are putting satellites in orbit, and that’s where Rocket Lab (RKLB) comes in.
Rocket Lab is a publicly traded company that, while still small, is working towards fielding a viable competitor to SpaceX’s Falcon 9 rocket some time next year.
There are still a handful of hurdles to overcome (one of which is huge), but Rocket Lab’s development timeline and second-place status put it at the front of the pack to compete (eventually) with SpaceX. Plus, it’s publicly traded.
Last year, 87% of successful U.S. launches (96 of 110 in total) were performed by SpaceX.
Rocket Lab came in second, with eight launches on its Electron platform, a small-lift partially reusable launch vehicle.
But putting a satellite in orbit is essentially where the comparison ends.
In 2023, SpaceX lifted an aggregate payload of 1,200,000kg into orbit. Rocket Lab’s total was closer to 820kg, or less than 0.07%, and at a much higher price point.
Getting a satellite into orbit runs about $25,000/kg on Electron, whereas the Falcon 9 costs closer to $3,000 to $6,000/kg.
That figure does come with some caveats, however.
SpaceX has faced criticism for allegedly intentionally undercutting smaller competitors in price, which some have called uncompetitive.
Also, there were 2,850 spacecraft deployed globally in 2023, with 2,222 deployed by U.S. companies.
SpaceX’s share of that total, or 1,986 spacecraft, was predominantly made up of Starlink satellites (over 99%) with other non-Starlink satellites being hoisted as part of their “Rideshare” program, which offers favorable pricing at the cost of SpaceX prioritizing its own launch windows and conditions.
In other words, SpaceX has a huge chunk of the “upmass” (putting stuff in orbit) market, which puts a target on its back. And thus far, it hasn’t faced any real challengers due to cost.
The most significant part of the cost difference simply comes down to platform size.
For low-Earth orbit, the Electron platform has a maximum payload of 300kg compared to a maximum Falcon 9 payload of 22,800kg. Until they can scale up their payload, Rocket Lab cannot compete on per-kilogram cost and has to differentiate itself with delivery flexibility and accuracy.
You can see that in the following graphics from Rocket Lab’s latest investor presentation.
So, if Rocket Lab is winning on efficiency and accuracy, there’s a case to be made that they’ll garner even more business when they can also compete on price.
On the other hand, with so much of SpaceX’s payload being Starlink, there are questions about just how much market share a competitor could feasibly grab.
But there are two factors that are likely to tilt the odds more in Rocket Lab’s favor in the next year (at least as far as grabbing non-Starlink market share is concerned).
The Neutron Medium-Lift Launch Vehicle
The first is the company’s much-anticipated Neutron medium-lift launch platform, which is expected to launch in 2025.
The first launch has been pushed back from 2024, but if the 2025 timeline holds, Neutron will have gone from announcement to launch even faster than SpaceX’s Falcon 9 did.
And it seems to be well on its way, having just fired its Archimedes engine for the first time earlier this summer.
The Neutron platform would immediately make Rocket Lab competitive on cost with SpaceX.
With the test of Archimedes, Rocket Lab is prioritizing production and engine qualification, with the ultimate goal being Neutron’s inaugural launch in mid-2025.
And with a billion-dollar backlog (for Electron) and half as much in cash on hand, the company has the financial war chest to get there.
The Government’s Thumb Is on the Scale
The second factor that stands to benefit Rocket Lab is the U.S. Space Force’s new emphasis on what they call “Tailored Mission Assurance.”
In a press release earlier this year, Frank Calvelli, Assistant Secretary of the Air Force for Space Acquisition and Integration, was quoted as saying, “Today marks the beginning of this innovative, dual-lane approach to launch service acquisition, whereby Lane 1 serves our commercial-like missions that can accept more risk and Lane 2 provides our traditional, full mission assurance for the most stressing heavy-lift launches of our most risk-averse missions.”
This segmented approach to risk is designed to allow new providers to onboard into lower-risk services and gain experience.
In the same release, Brig. Gen. Kristin Panzenhagen, program executive officer for Assured Access to Space, explained, “Our strategy accounted for this by allowing on-ramp opportunities every year, and we expect increasing competition and diversity as new providers and systems complete development.”
Put another way, multiple risk tiers serve as a proving ground, precisely the kind of step one would take to acknowledge the high risk of launches while fostering competition.
The added emphasis on provider diversity doesn’t guarantee that Rocket Lab will be able to break SpaceX’s stranglehold on space, but with 62% of all non-SpaceX launches so far in 2024 and the progress with Neutron, they’re well on their way to being a contender.
As for Rocket Lab stock, it’s risen 35% so far this year and is perched near multi-year highs. It’s highly speculative, but with SpaceX being private, it may be the best play on what appears to be a burgeoning commercial space race.
