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Why Rocket Lab, Astra Space, and AST SpaceMobile Stocks All Crashed Today

What happened

Tuesday was a miserable day to own space stocks.

In 1:20 p.m. ET trading, shares of AST SpaceMobile (NASDAQ: ASTS) are down a steep 9%, and Rocket Lab USA (NASDAQ: RKLB) and Astra Space (NASDAQ: ASTR) aren't doing any better -- down 9.2% and 9.8%, respectively.

All of a sudden it seems investors have lost interest in the final frontier.

Image source: Getty Images.

So what

Why did that happen? It may be a confluence of factors.

On the one hand, space start-up Astra stock went "to the moon" yesterday, shooting as high as a 42.5% gain at one point, before closing the day up about 15%. That presented a windfall profit for investors who had bet -- rightly -- on the company's succeeding with its seventh attempt at a rocket launch, which did in fact reach orbit in the wee hours of the morning on Saturday.

It also provided these investors an opportunity to cash out their winnings today, and the cavalcade of investors rushing to exit Astra may have sparked a run on all space stocks, as other space enthusiasts took their cue and headed for the exits as well.

But I very much fear there's another factor at work here, and it's one that may plague investors in the space sector for years.

Now what

Astra Space, AST SpaceMobile, and RocketLab, after all, have more than just space in common. All three of these companies decided to go public long before reaching anything approaching profitability. (Indeed, Astra doesn't just lack profits. It even lacks revenue!)

The combined revenues of all three of these companies add up to less than $60 million -- and 85% of that is from just one of the companies, RocketLab -- while their combined losses amount to more than $424 million, according to data from S&P Global Market Intelligence.

Suffice it to say that's not a lot of "value" to support the $9.5 billion combined market capitalization of these three companies, and this makes the stocks susceptible to dramatic sell-offs whenever investors lose confidence in their prospects.

Granted, analysts are optimistic about all three stocks turning profitable... eventually.

According to S&P Global estimates, Astra, AST, and RocketLab are each due to turn in their first GAAP profits in 2024. That still leaves three years for investors to wait, however, before any of these companies has a price-to-earnings ratio to hang a valuation on. Expect brief moments of intense panic, such as we're seeing today, until it finally becomes possible to value these stocks with anything approaching accuracy.

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Rich Smith owns shares of Rocket Lab USA, Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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