An Editorial
Growth in the space industry could come very quickly, according to a recent note from Morgan Stanley. But comparing the field to autonomous vehicles doesn’t feel like a winning analogy. Nor does having hosting/domain provider “Go Daddy” among its “Space 20” stocks list.
“Significant development” from space ventures is expected, according to CNBC reporting on the Morgan Stanley client note published on June 22. The investment firm put a value of $350 billion on the space industry in October 2017 and believes it could grow into a sector of more than $1.1 trillion by 2040.
Investors have shown a “limited degree of interest” in more than 90 privately owned space companies Morgan Stanley is tracking, says the CNBC report, comparing this to a “relative lack of interest” in the firms early discussions on autonomous vehicles in 2013 and 2014. “We see a similar pattern forming today in space.”
Billions of dollars have poured into autonomous vehicle research and development, but there’s no clean regulatory path to put vehicles on the road. One can easily argue there’s no clean path for many New Space startups to be profitable at this point in time, but the metrics for success in space are relatively clean: 1) Put hardware into flight/orbit 2) Generate cash flow 3) Generate profits.
It is also unclear how, over the long run, autonomous vehicles will affect industries like insurance, health care, and the traditional auto industry. Cannibalization of existing markets and the death/consolidation of existing companies is likely as new business models occur. The space industry is already seeing a slowdown in production of geostationary earth orbit (GEO) communications satellites. Is this a temporary pause while operators see what low earth orbit constellations and on-orbit servicing have to offer or a permanent shift?
If we give Morgan Stanley the benefit of the doubt on a general comparison of autonomous vehicles and space, the Morgan Stanley’s “Space 20” stocks list defies logical explanation without access to deeper documentation and/or justification. The investment banker puts Apple, Alphabet(Google), Microsoft, Facebook, Amazon, Adobe, Intuit, Shopify, and GoDaddy in the list.
How do Adobe, Intuit, Shopify and GoDaddy even come close to being “Space 20” stocks? Apple was (once) rumored to invest in a Boeing LEO satellite network. Alphabet, Microsoft, and Amazon are all big data players and will benefit from collecting, storing, and analyzing the petabytes of data which will flow from new satellite IoT and imaging startups; Alphabet is also a rumored potential investor of Boeing’s LEO satellite network. Facebook has dabbled in building satellites and buying satellite time as one means to extend internet access to developing markets, so, maybe.
More legitimate entrants on Morgan Stanley’s Space 20 list include Boeing, Honeywell, Softbank, United Technologies, Lockheed Martin, Qualcomm, Northrop Grumman, Analog Devices, SES, and Inmarsat. Softbank has a big investment in OneWeb. Qualcomm wants to sell chips everywhere and has a stake in OneWeb.
Now maybe there is some method to Morgan Stanley’s madness. But if you are going to throw GoDaddy into the same basket as Boeing, Lockheed Martin, and Northup Grumman, I can’t say what it is.
