Rocket Lab plans to go public through Vector Acquisition (VACQ) SPAC, while Astra will go public through Holicity (HOL) SPAC. Both of the reverse merger transactions are anticipated to close in the second quarter of 2021. VACQ and HOL are currently trading near their IPO price of $10 per share.
VACQ has fallen 35 percent from its 52-week highs. HOL is also down over 55 percent from the highs. Which of these is a better space exploration SPAC stock to buy now following the pullback?
Space exploration stocks are falling
The sharp drop in space exploration stocks can be attributed to a broad-based sell-off as investors shifted their focus from high-growth to value stocks. Fears of inflation and increasing bond yields have made space exploration stocks less attractive to investors.
Rocket Lab’s first flight
Rocket Lab builds small rockets to launch satellites. The company has already successfully launched 97 satellites to orbit on 18 Electron missions to date. Its Electron rocket costs $7 million per launch, which stands around 60 feet tall and can carry up to 300 kilograms to low Earth orbit.
Rocket Lab also revealed plans for a second, bigger rocket named Neutron that will be capable of carrying even more payloads than the Electron. Neutron is expected to launch in 2024 for the first time. Rocket Lab also expanded its operations by building satellites after launching its Photon spacecraft in 2020.
Astra’s first flight
Astra’s short-term objective is to reach orbit, which is the next step after breaking the barrier to space in December 2020 with its most recent mission. The next Astra launch is scheduled for this summer, and it will be the company's first to generate revenue. The company’s rocket is 40 feet tall and can carry up to 100 kilograms to low Earth orbit. However, Astra's focus is to keep the rocket's cost as low as possible with pricing as low as $2.5 million per launch. The company is expecting 15 launches in 2022.
VACQ versus HOL: Which is a better SPAC stock to buy?
The VACQ and Rocket Lab merger valued the combined entity at a pro forma implied equity value of $4.8 billion. In the investor presentation, Rocket Lab said that it expects to post revenues of $749 million in 2025, which would mean a 2025 price-to-sales multiple of 6.4x.
It expects to be EBITDA positive in 2023 and expects to post an EBITDA of $168 million in 2025, which would mean a 2025 EV-to-EBITDA multiple of 24.3x.
To put that in perspective, Astra expects to post revenues of $1.5 billion in 2025 and an EBITDA of $694 million in that year. This would mean a 2025 price-to-sales multiple of 1.7x, which is lower than Rocket Lab. As a result, HOL stock looks like a good buy based on its strong growth outlook and attractive valuations.
Best space exploration stocks to buy
The outlook for space exploration stocks looks promising. The space economy is set to triple to a $1.4 trillion market size over the next 10 years, according to Bank of America estimates. Lockheed Martin and Northrop Grumman are the best space exploration stocks to buy now. Boeing and Astra are also well-positioned to benefit from NASA’s space expansion plans.