Seven satellite stocks to buy for growth amid rising demand for launches give investors opportunities to profit from the industry’s increasingly popular services.
The seven satellite stocks to buy are highly recommended by savvy industry observers who are forecasting which companies should benefit the most from the latest advanced services. The wars started by Russia with its invasion of Ukraine and by Hamas militants with its murderous attack of residential communities in Israel last Oct. 7 have only added increased military demand for satellite services to the expanded needs of commercial users.
The seven satellite stocks to buy for growth specifically are benefitting from reduced prices to put spacecraft into orbit due to the advent of reusable rockets and the soaring demand for advanced satellite services. The U.S. Department of Defense and countries in the North Atlantic Treaty Organization (NATO) are providing weapons, equipment and satellite reconnaissance to Ukraine in its defense against Russia’s continuing invasion that began on February 24, 2022.
Seven Satellite Stocks to Buy Shine With Defense Spending
Defense spending, in particular, is on the ascent amid mounting geopolitical security risks, according to BofA Global Research. Plus, a recovery in the commercial satellite and space sectors appears potent enough to overcome economic uncertainty, BofA continued.
In the United States, the Space Force-operated Defense Support Program (DSP) satellites are a key part of North America’s early warning systems. In their 22,300-mile, geosynchronous orbits, DSP satellites help protect the United States and its allies detect missile launches, space launches and nuclear detonations.
The DSP satellites use an infrared sensor to detect heat from missile and booster plumes against the Earth’s background. Technological advancements to ground processing systems dating back to 1995 enhanced detection capabilities of smaller missiles to improve warnings of attacks by short-range missiles against U.S. and allied forces.
U.S. Defense Strategy Fuels Growth
U.S. National Defense Strategy addresses the need to use deterrence as a primary way to protect the homeland and modernize military preparedness, wrote Jason Gursky, an aerospace and defense analyst with Citigroup. The U.S. government is investing in nuclear defense capabilities, as well as conventional military planes, ships and tanks, he added.
In addition, the U.S. Department of Defense is funding an initiative called Joint All-Domain Command and Control – whose primary mission is to reduce timelines between “sensors and shooters” to provide further “deterrence and tactical advantage,” Gursky wrote in a recent research note.
“This is being done through the proliferation of sensors across the space, land, air and sea domains and the ability to quickly analyze vast amounts of data using AI,” Gursky continued. “In our view, investments in this initiative support higher defense spending through the end of the decade, and that a rising tide will lift all boats – with most contractors benefiting from it.”
Seven Satellite Stocks to Buy for Growth: Honeywell (NYSE: HON)
Several companies involved heavily in the satellite and space business have received “buy” recommendations from Citigroup. One of them is Honeywell International Inc. (NASDAQ: HON), a Charlotte, North Carolina-based manufacturer of aerospace and automotive products; residential, commercial and industrial control systems; specialty chemicals and plastics; and engineered materials.
The company announced a $1.9 billion acquisition of CAES Systems Holdings LLC (CAES) from private equity firm Advent International on June 28 to enhance its defense technologies in space, air, land and sea. CAES’ high-reliability radio frequency technologies have the potential to help Honeywell drive long-term growth and further diversify revenue streams in the defense industry.
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Honeywell is a current profitable recommendation in the Flying Five portfolio of the Forecasts & Strategies investment newsletter led by Mark Skousen, PhD, an economist who serves as a Presidential Fellow at Chapman University. The Flying Five stocks are Skousen’s choice among the five high-dividend-paying Dow stocks with the lowest prices. He has been recommending a Flying Five Portfolio each year since the early 1990s. Those stocks typically outperform the market.
Ben Franklin scion Mark Skousen, head of Forecasts & Strategies, talks to Paul Dykewicz.
Honeywell has a tradition as a space company that includes serving NASA with the Apollo moon landing missions. Roughly 1,000 satellites, or 80% of those currently in orbit, have Honeywell components on board, according to the company.
Citigroup rates Honeywell as a “buy” due to a solid long-term earnings per share (EPS) growth potential despite an uncertain macro environment. Short-cycle weakness should ease over time and longer-cycle end markets, particularly aerospace, could stay resilient and let the company remain well positioned in secular growth market such as automation and digitalization, Citigroup wrote in a recent research note.
Plus, recent structural cost actions could drive better-than-expected operating leverage in a growth environment, Citigroup continued. Finally, accelerated cash deployment and an under-levered balance sheet with good cash flow could spur further upside over time, Citigroup concluded.
Chart courtesy of www.stockcharts.com
Seven Satellite Stocks to Buy for Growth: Booz Allen Hamilton
Booz Allen Hamilton (NYSE: BAH), a McLean, Virginia-based recommendation from the Chicago-based investment firm William Blair, has advanced after reporting fourth-quarter revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) above consensus analysts’ estimates during late May. The dividend-paying defense stock’s management issued its fiscal 2025 guidance above consensus on the strength of its pipeline of opportunities and hiring trends offset by potential election and geopolitical disruptions.
Booz Allen’s artificial intelligence (AI) and machine learning (ML) Databricks partnership for the Advana platform has been a major growth driver, wrote Louie DiPalma, a William Blair aerospace and defense analyst. The industry continues to benefit from a strong 2023 defense budget, a favorable hiring environment and wage inflation, he added.
“Headcount trends and strong bookings will likely continue to be the main drivers of revenue growth, and both are in the firm’s favor,” DiPalma continued. “Over the past few years, Booz Allen has won elite contracts for cybersecurity (Thunderdome, CDM DEFEND, CyPrESS), data analytics (Advana, CDC DMA), artificial intelligence (EMAPS, the JAIC, Space Force remote sensing), and augmented reality (Army digital soldier, soldier as a service). We view the stock as artificial intelligence at a reasonable price (AARP) and see upside of greater than 15% over the next year.”
Chart courtesy of www.stockcharts.com
Booz Allen Hamilton Stock Has Supporters
Another fan of Booz Allen Hamilton is Jim Woods, a former Army paratrooper who has recommended the company profitably in the past. Woods has a big defense contractor in the Income Multipliers portfolio of his Successful Investing newsletter but he also likes Booz Allen Hamilton.
Jim Woods leads Successful Investing and co-heads Fast Money Alert.
As a former military man, Woods has a personal interest in defense and cyberspace, following them closely for subscribers of his Successful Investing newsletter and his trading services such as Bullseye Stock Trader, High Velocity Options and Fast Money Alert. He co-heads the latter service with Mark Skousen, PhD, who also leads the Forecasts & Strategies investment newsletter.
Booz Is a Bullseye Buy for Woods
Subscribers of Bullseye Stock Trader collected a profit of 21.67% in 2019 when Woods recommended the stock for slightly more than three months. He also recommended related call options in Bullseye Stock Trader that produced a profit of 166.67%.
Fast Money Alert subscribers gained 9.59% after only about a month late in 2022 with a follow-up recommendation of Booz Allen Hamilton. A related call option recommendation in Fast Money Alert for Booz Allen Hamilton produced a 239.27% profit in less than one month.
Bryan Perry, who leads the Cash Machine investment newsletter, generated a 25% gain for his subscribers in the Breakout Options Alert advisory service in less than three weeks last May.
Bryan Perry leads the Breakout Options Alert advisory service.
Connell Adds Affirmation in Analysis of Booz
Michelle Connell, owner and president of Dallas-based Portia Capital Management LLC, is yet another fan of Booz Allen Hamilton. Focused on wealth management for private investors and non-profit institutions, Connell advised that the company has “robust fundamentals” and has generated more than a half billion dollars in free cash flow each year for the last 10 years. Its return on equity is well over 50%, she added.
Plus, the company’s revenue growth is in excess of 15% a year. Expect this to increase given the demand for AI-related consulting services, Connell continued.
The stock’s dividend yield of 1.3% likely will increase, given the amount of demand for AI, as well as its strong free cash flow, she added. Plus, there is no short interest in the stock, meaning no one is willing to go against BAH and its stock performance, Connell concluded.
Michelle Connell leads Dallas-based Portia Capital Management.
Seven Satellite Stocks to Buy for Growth: Rocket Lab (NASDAQ: RKLB)
Several companies engaged in the satellite and space businesses have received “buy” recommendations from Citigroup. One Is Long Beach, California-based Rocket Lab USA, Inc. (Nasdaq: RKLB), a global launch services and space systems provider. On June 20, Rocket Lab announced it successfully launched its 50th Electron mission to deploy satellites for France-based Kinéis, an Internet-of-things (IoT) company. Rocket Lab reported that Electron has reached the milestone of 50 launches faster than any commercially developed rocket in history.
Chart courtesy of www.stockcharts.com
Both Citigroup and BofA Global Research are among the investment firms that recommend Rocket Lab as a buy.
In addition, prime contractors now appear to be willing to buy dedicated launch vehicles to support internal research and development (IRAD) projects – something previously not seen in any great numbers, Gursky wrote in a recent research note.
A recent $515 million award by the Space Development Agency (SDA) is a verification of the company’s products and technical prowess, following a commercial award on a Globalstar (NYSE American: GSAT) low-earth orbit (LEO) program. These two programs together suggest customer adoption for the company’s satellite products is accelerating, and the recent improvement in liquidity is likely to allow for more seamless execution on this backlog as the company expands capacity and working capital.
Chart courtesy of www.stockcharts.com
Seven Satellite Stocks to Buy for Growth: Motorola Solutions (NYSE: MSI)
Chicago’s Motorola Solutions Inc. (NYSE: MSI) is rated as outperform by Louie DiPalma, an aerospace defense analyst with investment firm William Blair, also of the Windy City. Motorola Solutions offers regulated telecom services that include wireline, wireless and satellite networks, integrated into ASTRO Connectivity Services (ACS). Satellite resiliency has become an integral part of Motorola’s ASTRO Connectivity Service offer.
Motorola trades at roughly 27 times the investment firm’s forward-year (2025) earnings per share (EPS), a premium to the company’s 21-times February 2020 pre-pandemic multiple and in line with its November 2021 peak multiple, DiPalma wrote in a recent research note.
“In our view, Motorola can maintain this premium multiple over the next year as it demonstrates its resiliency to macro pressures and law enforcement budgets remain robust,” DiPalma wrote. “Record demand for public safety communications, video security and command center software should drive long-term EPS growth in the low double digits when taking into account organic growth, acquisitions and stock buybacks.
“We believe the annual stock return should at least match EPS growth. Accordingly, we reiterate our outperform rating. In our view, the primary risk to Motorola shares is valuation multiple compression from decelerating revenue growth.”
Chart courtesy of www.stockcharts.com
Seven Satellite Stocks to Buy for Growth: Lockheed Martin (NYSE: LMT)
Lockheed Martin (NYSE: LMT), a Bethesda, Maryland-based aerospace and defense company, recently received a 12-month price target of $525 and a buy recommendation from Citigroup. The company is a combination of a 1995 merger between Lockheed Corporation and Martin Marietta Materials, Inc.
In its enlarged form, Lockheed Martin focuses on defense, space, intelligence, homeland security and information technology. The company operates the key business segments such as Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.
Lockheed Martin’s management recently gave guidance that margins are likely to trough in 2024 and head toward 11%-plus over time, driven largely by product mix, Citigroup wrote in a recent research note. The loss-making classified contract at Lockheed Martin’s MFC business will be a tailwind in 2025, i.e., lower forward loss charges, while the rest of the margin accretive MFC portfolio is likely to grow faster than the remainder of the company. Further, new awards across the company face the current cost environment and should produce margins higher than pre-pandemic backlog, according to the Citigroup research note.
Lockheed Martin recently announced it awarded privately held Firefly Aerospace a contract for 15 launches, including options for 10 additional ones in the future. Firefly’s Alpha rocket is in a unique position with 1,000 KG of payload capacity, offering much more than Rocket Lab (NASDAQ: RKLB). Industry launch giant SpaceX offer greater capacity, leaving a niche for Firefly to meet the needs of defense contractors like Lockheed Martin for certain missions, Citigroup’s aerospace analyst Gursky wrote.
Chart courtesy of www.stockcharts.com
Seven Satellite Stocks to Buy for Growth: SAIC
Reston, Virginia-based Science Applications International Corp. (NASDAQ: SAIC) provides defense, space, civilian and intelligence markets services to the U.S. government to produce $7.2 billion in annual revenues. The government contracts give SAIC a stable, recurring revenue base, significant margin expansion opportunities and a strong cash flow.
SAIC has a history of creating shareholder value through dividend payouts, share repurchases and acquisitions. The company further is carving out a role in artificial intelligence by recently launching Tenjin GPT, a new internal, generative artificial intelligence (AI) resource. The capability is aimed at harnessing cutting-edge AI capabilities to automate and optimize business processes.
Tenjin GPT is an example of using technological innovation to provide real-time insights and data analysis, enhancing creativity and collaboration. In addition, Tenjin GPT is the latest feature of SAIC’s data science platform, leveraging the power of OpenAI’s GPT to give users access to the latest advancement in natural language processing.
The state-of-the-art AI model enables users to develop sophisticated applications, to automate repetitive tasks, to streamline processes and to gain insights from data. Powered by Microsoft’s Azure AI, the framework is intended to ensure seamless integration and scalability.
SAIC offers solutions in mission intellectual technology (IT), enterprise IT, engineering services and professional services. The company aims to integrate emerging technology into mission critical operations to modernize and enable critical national imperatives.
Also in May, the company won a $232 million contract to develop intelligence and electronic warfare systems for the U.S. Army. The contract is part of the Department of Defense Information Analysis Center’s (DoD IAC) multiple-award contract (MAC) vehicle. These DoD IAC MAC task orders (TOs) are awarded by the U.S. Air Force’s 774th Enterprise Sourcing Squadron to develop and create new knowledge to enhance the DTIC repository and the research and development (R&D) and science and technology (S&T) community.
Bargain-hunting investors may find now is a good time to invest in SAIC. The stock dropped recently but appears to be trending up again, as shown by the chart below.
Chart courtesy of www.stockcharts.com
Seven Satellite Stocks to Buy for Growth: General Dynamics
General Dynamics (NYSE: GD), headquartered in Falls Church, Virginia, provides land combat vehicles, weapons systems and munitions, ship construction and repair, and technology products and services. In addition, General Dynamics is a leader in the business aviation industry through its Gulfstream and Jet Aviation subsidiaries. Overall, General Dynamics operates in four main segments: Combat Systems, Aerospace, Marine Systems and Technologies.
The company notched an overall operating margin of 11.0%. It also produced margins of 15% in Aerospace, 14.4% from Combat Systems, 9.5% with Technologies and 7.6% by Marine Systems. Citigroup rates shares of General Dynamics as a “Buy.”
Citigroup recommended building positions in the company due to:
1) An Aerospace segment growth outlook lifted by recent order trends and a backlog that gives earnings upside for the next several years;
2) Marine segment growth prospects and improved margins as the company’s labor force and supply chain normalize post-pandemic;
3) Rising demand for the Combat Systems segment as the United States and its NATO allies prepare plans for increased military spending to deter further land-based conflicts in Europe; and
4) Increasing valuation for defense prime contractors.
Chart courtesy of www.stockcharts.com
Seven Satellite Stocks to Buy for Growth as Geopolitical Risk Rises
Geopolitical risk just seems to keep rising. An enhanced alliance recently announced between Russia and North Korea is adding to the danger of ongoing wars in the world. Experts speculate China’s leaders must be concerned about a potential loss of influence over North Korea after the latter country’s leader Kim Jong Un and Russian President Vladimir Putin signed a pact last week, according to the Associated Press.
The alliance not only gives Russia additional access to arms and military equipment, as well as potential new soldiers to mount new attacks on Ukraine, but it could worsen stability on the Korean Peninsula. China’s leaders face what could be the strongest Russia-North Korea partnership since the Cold War.
That increased risk comes as the Middle Eastern conflict in Gaza between Israel and Hama shows no near-term end. Israel keeps fighting Hamas to secure the return of hostages taken during the Oct. 7 assault of communities near Gaza.
Israel leaders are trying to find and destroy an extensive tunnel system in neighboring Gaza that has been used to store weapons, as well as hide the Hamas leaders and militants who were responsible for the Oct. 7 raid in Israel that killed an estimated 1,200 people and took 240 hostages into Gaza. Clashes continue in the city of Rafah in Gaza, where Hamas militants remain in the midst of a large Palestinian civilian population.
The Gaza Ministry of Health estimates that more than 37,925 Hamas fighters and Palestinian civilians have lost their lives since the war began Oct. 7.
Meanwhile, Russia continues trying to seize additional land in Ukraine. To stiffen Ukraine’s defense against Russia’s unrelenting attacks, Western governments have been providing additional arms and equipment, as well as allowing some of it to be used against military targets that previously had been declared off-limits.
The seven satellite stocks to buy for growth, as the launch industry keeps securing new missions to put the spacecraft into orbit, are benefitting from strong and increasing demand. Investors who eye share price appreciation seem well-positioned to find it among satellite stocks that provide compelling services in a variety of orbits.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Special Sale for Graduation Season! Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is great gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for reduced pricing on multiple-book purchases.
