America's Newest Space IPO Was a Smashing Success

As the old saying goes, "Sometimes, it's better to be lucky than to be good."

Take investors in the Voyager Technologies (NYSE: VOYG) initial public offering (IPO), for example. Once upon a time, space stocks were a rarity. So much so that Sir Richard Branson was able to IPO Virgin Galactic as the only real way for investors to "dabble a little bit in a spaceship company, own a little bit of a spaceship company" -- and watch the stock price zoom into orbit.

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Virgin's success soon inspired a wave of imitators -- special-purpose acquisition companies (SPAC) that dutifully zoomed when first created, only to crater thereafter, frightening many investors away from the idea of investing in space stocks for years. That all changed, however, when President Donald Trump won his second term of office, promising to bring Elon Musk into government and invest heavily in space exploration. Space stocks zoomed once again, sending the share prices of companies like Redwire (NYSE: RDW), BlackSky (NYSE: BKSY), and Rocket Lab (NASDAQ: RKLB) to the Moon earlier this year.

Image source: Getty Images.

It was at this propitious moment in time that Voyager Technologies decided it, too, would go public. Wooing investors with promises to build an international coalition of companies and create a new, privately owned space station to replace the International Space Station (ISS), Voyager stock debuted to widespread acclaim on June 11. Expected to price as low as $26 a share (and actually pricing at $31), Voyager opened its first day of trading at $69.75 -- more than twice the expected price. Even falling to close at $56 and change, it's hard to call Voyager's IPO anything but a smashing success.

If you got in anywhere near the IPO price, you were lucky indeed!

Momentum only lasts so long

But what if you were not among those lucky few who got in at the IPO price? Well, in that case, I'd say you're probably feeling a bit less fortunate.

The first 10 trading days since Voyager's IPO have not been kind to momentum investors. Seeking a rocket ride "to the moon," they instead have found themselves on an elevator slowly descending to Earth. By close of trading last Friday, for example, Voyager stock had given up much of its IPO price gains and fallen to close within pennies of $43 a share. Again, a nice profit if you were lucky enough to get in on the ground floor.

But a significant loss if you didn't.

Invest in fundamentals, not momentum

Now, on the flip side, Voyager's steeply fallen stock price does give investors, who didn't get in at the IPO price, a second bite at the apple and a chance to buy into the stock at a bit more than its price immediately post-IPO (it was trading at $48.25 a share at Friday's open).

But should you even want to? Let's run a few numbers and see if an answer arises.

Let's begin with the basics: Voyager Technologies is a $2.5 billion small-cap aerospace and defense contractor. Best known for its role leading a consortium of companies building the Starlab space station, Voyager actually gets only about half its revenue ($75 million last year) from space activities. The other half ($78 million) comes from "defense and national security" products, including "artificial intelligence (AI)-enabled edge computing platforms and missile propulsion modules."

Neither half of Voyager is currently profitable according to generally accepted accounting principles (GAAP), however. Indeed, according to data from S&P Global Market Intelligence, Voyager reported $74 million in net losses last year -- losing about $0.50 for every $1 in products it sold. The company's also burning cash at an even higher rate, with free cash flow running negative to the tune of more than $125 million last year (nearly 70% worse than the GAAP numbers make it seem).

The upshot for would-be Voyager stock investors

With no Wall Street analysts yet publishing earnings forecasts for Voyager, it's hard for an investor to know when Voyager might eventually turn profitable. But here's my two cents:

With Voyager currently working full tilt to build the Starlab space station, management forecasting that the station will cost "approximately $2.8 billion to $3.3 billion" to build, and Voyager hoping to launch the station aboard a SpaceX Starship rocket (which hasn't yet been certified for flight) in 2029, the absolute earliest anyone should expect to see Voyager turn a profit is 2029. Most likely, it will take some time after the first launch before Starlab begins raking in enough revenue to help Voyager turn a profit. Most definitely, the company won't be able to get anywhere near profitability before Starlab is launched.

Long story short, that means Voyager will spend the next several years deeply unprofitable as it spends hand over fist to build its multibillion-dollar space station. Whether the situation then improves after the station is built is anyone's guess.

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