2 Space Stocks You Should Buy Before Piling Into SpaceX

The space economy has captured the spotlight this year, primarily driven by the highly anticipated initial public offering (IPO) of Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX. On June 12, the company made history with the largest initial public offering ever and closed the day with a valuation of around $2.1 trillion, putting it in the company of some of the world's largest companies.

That said, SpaceX doesn't have nearly the revenue of those behemoths and trades at an expensive valuation that prices in massive future growth, making the stock vulnerable to huge price swings. If you're an investor looking for exposure to the rapidly expanding space economy, here are two space stocks that are better buys before piling into SpaceX.

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Rocket Lab's business spans the space ecosystem

Rocket Lab (NASDAQ: RKLB) is the biggest competitor to SpaceX's launch business and the second-most-used launch platform in the United States today. Over the past year and a half, Rocket Lab has made 35 launches, dwarfed by SpaceX's 260 over the same period. That said, Rocket Lab has carved out a niche with its small-lift Electron rocket, which enables it to serve small to medium-sized satellite customers.

Because its Electron rocket can carry payloads of only around 300 kilograms (660 lbs), Rocket Lab cannot currently carry large payloads into space like SpaceX can with its Falcon 9. However, its small rocket provides its customers with greater flexibility and control over the timeline while also enabling precise placement of these smaller satellites into orbit.

In addition, Rocket Lab has developed the Hypersonic Accelerator Suborbital Test Electron (HASTE), a launch platform specifically designed for defense and national security purposes. The advantage of HASTE is that it provides the government with high-cadence, cost-effective testing for hypersonic and suborbital payloads as the Pentagon evaluates various defense technologies. In March, Rocket Lab secured a $190 million contract to conduct 20 hypersonic test flights for its HASTE launch vehicle.

Rocket Lab's launch services business continues to grow steadily, but the company has another avenue for growth through its space systems business. Here, Rocket Lab designs and manufactures a wide range of space components and technologies, such as satellite buses, reaction wheels, star trackers, solar panels, separation systems, radios, and software. Of its $2.2 billion backlog, $1.3 billion is related to its space systems segment.

SpaceX also owns xAI and other technology businesses, where it is pegging most of its future growth. For investors looking for a more pure-play space stock, Rocket Lab's end-to-end space business spans multiple verticals, and the company has made major acquisitions in recent years to expand its role in the space ecosystem.

Lockheed Martin is a prime contractor for NASA's Orion program

Lockheed Martin (NYSE: LMT) is a massive defense contractor, with sales from aeronautics (notably its F-35 fighter jets and other military aircraft), missiles, rocket systems, and helicopters, as well as a growing space business. For investors seeking exposure to a more stable stock with ties to the space economy, Lockheed Martin is appealing.

The company's broad portfolio and position in the defense industry provide it with a strong competitive moat and a platform that translates into stable, long-term revenue. Its F-35 program is projected to generate $2.1 trillion over its 94-year lifecycle (from 1994 to 2088) and is a major part of its business, providing stability and buffering its earnings against recessions and economic volatility.

However, its space segment is another key growth driver for its wide-ranging business. Here, Lockheed develops missile-warning satellites, GPS satellites, classified spacecraft, and next-generation missile defense systems. In addition, Lockheed Martin is the prime contractor for NASA's Orion spacecraft, responsible for designing, building, and assembling the capsule that will take astronauts to the Moon and beyond.

Compared with SpaceX, Lockheed offers investors a more diversified business that benefits from recurring revenue from decades-long space programs, providing direct exposure to growing U.S. and allied spending on space infrastructure and to soaring defense spending amid geopolitical uncertainty.

On top of that, the company trades at a far lower multiple and pays a solid dividend yielding 2.7%, which it has grown every year for the past 23 years. For more conservative investors seeking exposure to the growing space economy, Lockheed Martin is an excellent stock to buy today.

Courtney Carlsen has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.