Bring on the big lighters: two major rocket launches ahead

What happened

Two massive rockets are expected to launch in the span of a few days:

• Blue Origin is expected to debut its New Glenn launcher on 12 January.
• SpaceX will debut an upgraded version of its Starship system on 13 January.

Launch dates are subject to possible delay depending on weather or technical readiness, but such delays would realistically only last for a few days.

Impact on our Investment Case

Two back-to-back launches of such massive rockets give a glimpse of the future of the space industry. More importantly, this highlights the vitality of the space ecosystem behind SpaceX, creating conditions where innovation and breakthroughs are the only ways to survive.

Blue Origin to finally reach orbit

The debut launch of the New Glenn rocket is important from several perspectives. Founded in the year 2000 by Jeff Bezos, the company has yet to reach orbit, having only operated suborbital tourist flights. After several strategic wanderings for the best part of the past decade, changes at the helm of the company in 2024, coupled with a closer involvement from Bezos, resulted in an acceleration of the development schedule. This acceleration is more than welcome, as the company is lagging far behind rival SpaceX, which has been successfully reusing its Falcon 9 family of launchers since 2015 and has been gobbling up contracts from both governments and private customers. This situation forces the hand of Blue Origin, which has no choice but to try to recover the booster on its maiden flight - which would be an astonishing accomplishment. 

Even if the recovery were to fail, this would only be a temporary setback: SpaceX proved that it was possible, and reusing boosters is the cornerstone of the business model of the new generation of launch services. More important are the consequences of this first launch. It indeed creates conditions that had been non-existent for SpaceX: pressure and competition. When New Glenn is fully operational, customers will be able to shop between more launch options for delivering large payloads to orbit. This would naturally decrease prices and, therefore, accelerate the development of the already dynamic ecosystem of private space services.

SpaceX does not stay still

The answer to this pressure is already unrolling. The Starship system is officially being designed to enable travelling to Mars. SpaceX has already made several test flights, the most spectacular resulting in the first stage being caught in flight by mechanical "chopsticks" attached to the launch tower. But the incoming flight will sport several improvements, notably a 25% increase in the propellant volume, which will enable higher payload capacity on operational versions. This test flight will also carry 10 simulators of a new version of Starlink satellites, which it will deploy on a suborbital trajectory.

These new satellites are the cornerstone of SpaceX's business model. Despite its young age, the Starlink constellation has already proven critical in a large array of civilian and military use cases. Its revenues are already substantial, and although detailed financials are not available, it is reported to have achieved breakeven for some time already, providing an appreciable source of funding for future ventures. However, the service is already reaching full capacity in some areas; the only solution is to deploy larger, bigger satellites, which current rockets cannot do.

SpaceX's business model is, therefore, reaching a stage where its own needs require developing a specific infrastructure, for which the funding comes from the service itself. This gives the company a clear competitive edge - the Amazon/Blue Origin duo is trying to replicate it - but competition ensures that every customer will take advantage of it.

Where does this leave investors?

There are two main ways to take advantage of this dynamic: targeting the infrastructure, and targeting the services benefiting from the infrastructure. The former option is potentially limited, considering that it is either the turf of legacy players coming from the defense world, or of prominent private players such as SpaceX. However, opportunities definitely exist. Our top conviction has been Rocket Lab USA Inc for quite some time already: the company is already the second U.S. launch provider (in number of launches) behind SpaceX, is developing a new larger and reusable rocket to scale its business, and has successfully expanded into adjacent markets such as satellite and space systems manufacturing. The choice is larger for services, which we segment into two main markets: Earth observation and telecommunications - both present attractive opportunities, such as AST SpaceMobile deploying internet connectivity directly to commercial smartphones. Although the deployment phase remains at an early stage, the demonstration phase is behind us, making revenues and profits a matter of when rather than if - all the more reason not to stay on the touchline.

Our Takeaway

The space industry is experiencing extremely interesting times, as the transition from governments to private players is fueling frantic innovation. These incoming launches are the perfect example of what this innovation can bring to the table: competition putting pressure on costs, enabling, in return, the development of a vibrant ecosystem providing previously unheard-of services. We believe we can capitalize on this trend by identifying and allocating to the players best positioned to capture such market potential.