Could the Next Great Space Stock Come From Japan?

In just a few weeks, the SpaceX IPO will arrive. Space investors are excited, with shares of popular names such as AST SpaceMobile and Rocket Lab up 43% and 65%, respectively, this month. Even Elon Musk's car company, Tesla, seems to be drawing on the enthusiasm surrounding SpaceX, gaining 11.5% so far in May.

Such dramatic share price gains have made it harder than ever to find bargains among space stocks, however -- among U.S. space stocks, at least. But what if we widen our telescopic lens just a bit and look internationally? Might it still be possible to find cheap space stock... abroad?

Image source: Getty Images.

Introducing Astroscale and SKY Perfect JSAT

This question occurred to me last week after receiving a press release from tiny Japanese space company Astroscale, which is apparently teaming up with an even larger Japanese space company called SKY Perfect JSAT to provide so-called "on-orbit services."

According to data from S&P Global Market Intelligence, Astroscale is the smaller of the two companies, with a market capitalization of $2 billion and annual sales under $34 million. SKY Perfect JSAT, by comparison, is a relative giant, weighing in at $7.6 billion in market cap and boasting more than $800 million in annual sales.

Both companies are publicly traded on the Tokyo Stock Exchange. The largest satellite operator in Asia, with 17 geostationary (GEO) spacecraft in orbit, SKY Perfect JSAT is the more established business, providing satellite-based pay TV and satellite communications services. (It's similar to a combination of EchoStar and Starlink here in the U.S.)

Astroscale, by contrast, is much smaller. Very much a start-up in the space industry, Astroscale wants to specialize in "on-orbit services," including repairing, refueling, and eventually disposing of old satellites, as well as orbital debris removal.

And if these sound like exactly the kinds of services that might interest a satellite constellation operator like SKY Perfect JSAT... well, SKY Perfect thinks so, too.

Astroscale + SKY Perfect JSAT = what?

According to last week's press release, Astroscale and SKY Perfect will form a "strategic partnership" cemented by SKY Perfect taking an equity stake in Astroscale. The press release didn't discuss the size of the investment, but a subsequent news story on satnews.com did: SKY Perfect, it turns out, will be investing 800 million yen ($5 million).

That's not a huge investment. Indeed, in the context of a funding round totaling 30.6 billion yen ($192.2 million), SKY Perfect's investment looks downright tiny. But if making this small investment helps SKY Perfect get a local company off the ground and into the business of extending the lifespan of its own satellites -- each of which can cost hundreds of millions of dollars to build and launch -- this partnership could pay big dividends.

Astroscale versus the competition

But there's no time to waste.

Back here in the U.S., multiple space companies have already targeted the nascent on-orbit services market, forcing Astroscale to play catch-up. The most recent entrant was privately held Blue Origin, which in March unveiled a Blue Ring space tug capable of servicing not only GEO satellites but even traveling between planets. Also in the race is up-and-coming rocket company Firefly Aerospace (NASDAQ: FLY), which plans to offer "Elytra" space tugs in three different sizes.

Already in the market are Northrop Grumman (NYSE: NOC), which has flown at least two commercial on-orbit missions with its Mission Extension Vehicle (MEV) and has an upgraded version called the Mission Robotic vehicle in the works; and also Rocket Lab with its smaller Photon "kick-stage" vehicle, which also serves as a space tug for smaller satellites.

Can Astroscale compete successfully with such an array of rivals? Astroscale is not currently profitable; it's burning $96 million in cash, and analysts polled by S&P Global think it will be 2029 before the company turns profitable -- and 2030 before it stops burning cash.

Maybe financial backing from SKY Perfect will suffice to see the company through. But I have to admit that, based on the numbers I see today, I'm not optimistic.

Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends AST SpaceMobile, Rocket Lab, S&P Global, and Tesla. The Motley Fool has a disclosure policy.