Why the Artemis I mission could be a colossal opportunity for growth investors | The motley fool

On Sunday, December 11, Artemis I returned to Earth.

Last week’s crash off the coast of California, after nearly a month in space, proved that Artemis’ Orion space capsule can take astronauts to the moon and bring them back safe and sound. It set the stage for more than a dozen future Artemis missions planned by NASA. The also arguably saved the entire Artemis program from potential cancellation, setting the stage for some of America’s best-known space companies to reap tens of billions of dollars in future revenue.

Disaster averted

As recently as 2019, a combination of development delays and cost overruns in the manufacture of key components of Artemis – the Space Launch System (SLS) rocket and the Orion space capsule – had space industry insiders publicly speculating that the program could be cancelled. Later reports from the US Office of Management and Budget (OMB) estimate the cost of each Artemis launch at $2 billion — and from the National Aeronautics and Space Administration (NASA) Office of Inspector General (OIG) estimating the cost at 4 .1 billion — added pressure on NASA to prove the SLS could fly.

If the SLS had failed to launch this month, or had failed en route to the moon, or had the Orion space capsule burned up on re-entry, there was a good chance that the Artemis program would not have survived that failure.

But SLS He made survive. And with him, so does the Artemis program.

Details, details

Now, that doesn’t change the fact that the SLS’s triumphant launch came… four years later than originally planned. It doesn’t change the fact that a program originally advertised as costing less than $10 billion has already cost taxpayers nearly $50 billion, according to a recent count by The Planetary Society.

However, it’s much easier to justify SLS’s incredible cost now that the program has hit its mark success than it would be to justify the same cost in the face of failure.

Indeed, if NASA has already sunk nearly $50 billion into Artemis, that almost becomes a point in the program’s favor. The same OIG report on SLS costs, mentioned above, also estimated that the entire Artemis program would consume $93 billion by 2025. So if we’ve actually already spent $50 billion of that amount, you could argue that now we have “only” $43 billion more to go.

With Artemis already more than half paid for, it might make sense to bite the bullet and keep spending whatever needs to be spent to complete the project and get American astronauts back on the moon.

What does this mean for investors?

Indeed, if you’re an investor in one of the major space companies participating in Artemis — Boeing (BA 0.43%)which is the prime contractor for SLS. Northrop Grumman (NOC 0.64%)which manufactures the main engines of the SLS. Aerojet Rocketdyne (AJRD 0.09%), who builds the amplifiers; the Lockheed Martin (LMT 0.83%)which makes the Orion capsule — you probably hope that’s it exactly how does Congress feel about Artemis at this point. For each of these companies, billions of dollars in future revenue depend on maintaining the Artemis program.

Of the more than $43 billion left to be spent through 2025, Boeing and Northrop together will potentially get $82 billion from Artemis through Deep Space Transport LLC, which recently won a NASA sole-source contract to run up to 20 Artemis missions. the next decade or two. Aerojet Rocketdyne, assuming it continues to build boosters for the rocket, can expect to earn billions more, and — since these rockets will understandably need many Orion capsules to launch on them — Lockheed Martin can count on even more billions for himself.

Reward and risk

So we are talking about a lot of money here. A lot of money there could they risked never turning into revenue for the space companies if Artemis I had failed. A lot of money that now has a good chance of being spent, monetized, and filtering through to these companies in the form of profit.

(According to data from S&P Global Market Intelligence, the average operating profit margin in the space divisions of these big four aerospace and defense companies is about 7.8%).

As I said, with so much money already invested in Artemis, and the project well underway, I am now of the opinion that Project Artemis will not canceled and will at least receive funding (and generate profits for its contractors) through NASA’s Artemis III mission, currently scheduled for 2025.

After that, who knows? The price of Project Artemis is still amazing. Whether Congress continues to fund it in its current form may depend on whether private space company SpaceX can offer NASA an acceptable alternative at a better price. In this regard, SpaceX has proposed the use of the cheaper Starship rocket as an alternative to SLS, and the company is once again moving towards an orbital test flight of Starship, which is expected to take place from the 1st quarter of 2023 to the end of 2024 .

Starship still has the potential to disrupt SLS and its contractors. But for now, it’s a plus: SLS.