Are These Aerospace Stocks On Your Watchlist?
Over the weekend, SpaceX thundered away from the Earth. With the successful launch and docking of SpaceX, investors are now looking for the best aerospace stocks to buy right now. Despite the global economy being hammered by Covid-19, both aerospace and defense stocks seem to be picking up. There’s no doubt that the collapse of air travel has dragged down certain aerospace stocks, but there are also some who are better positioned ahead of its eventual recovery.
This can be reflected from the iShares Dow Jones US Aerospace & Defense ETF (ITA Stock Report). Since the fastest and steepest decline in the stock market in March in modern history, the ITA ETF has been climbing steadily. This prompts investors to look for specific aerospace stocks to invest in. With steep share price declines in Boeing and Airbus, investors are not keeping their hopes high on these two. Instead, many analysts pointed out that there are other options to consider for investors who want to buy into the sector. Here are 3 stocks that are returning to investors’ radar over the weekend after the successful launch of SpaceX.
Top Aerospace Stocks To Buy Or Sell: Virgin Galactic
First up the list, Virgin Galactic (SPCE Stock Report). This is not the typical value stock investors are looking for because Virgin Galactic has not flown a single paying customer to space yet. But that doesn’t mean the company holds no potential for exponential growth. As some of you know, it aims to disrupt the new industry known as “space tourism”. If you are new to the aerospace industry, Virgin is also working on a hypersonic jet that could potentially cut travel time between New York and London to one hour. That would be at least 3 times as fast as the Concorde.
Virgin has proven that it’s SpaceShipTwo suborbital space planes are capable of reaching space. The good news here is that 600 paying customers have signed up wanting to fly to the space as soon it is approved for commercial operation. However, this is only for those who have too much cash to spare, considering that each ticket is costing $250,000. That’s quite a big sum of money to pay to Virgin for flying them to space and back.
Before you get all too excited, the company has actually yet to successfully fly any customers to space, or even fly commercial planes at hypersonic speeds. If you are a more down-to-earth investor, It could be difficult to put money into SPCE stock. However, with the successful launch of SpaceX, investors who fancy themselves as visionaries could take this opportunity to bet on the future of space tourism. Will Virgin Galactic’s stock price take off?
Top Aerospace Stocks To Buy Or Sell: Heico
Heico (HEI Stock Report) is one of the commercial aerospace stocks making a comeback. After shedding more than half of its value in the March market plunge, HEI stock is coming back up. It is now down just 16% year to date. This came after the company released its quarterly earnings on May 26, which made it one of the best aerospace stocks to buy. The company reported quarterly earnings of $0.55 per share on revenue of $468.1 million, beating analysts consensus of $0.44 per share in earnings on $462.86 million in revenue.
Diversified Business Helps Pull Heico Through Covid-19
Heico was able to outperform most of its industry peers through its substantial non-aerospace business. The company supplies components for in-demand medical devices such as ventilators to help combat Covid-19. Such demand is not showing signs of slow down anytime soon, considering that global cases are still on the rise. As a result, the supplies of medical components could provide a strong revenue stream in the near term.
Overall revenue fell 9% year over year in the quarter. This was mainly due to an 18% drop in the company’s aerospace unit. Over here, investors can speculate that Heico stock could take flight again when airlines rebound. The company obtains a significant portion of its aerospace revenue from the sales of spare parts. As many airlines are cutting costs, they have delayed or shelved plans to purchase new fleets. It’s fair to assume that airlines will continue to depend on their existing fleets. As such, the role of spare parts will not be diminished. With that in mind, many analysts believe that Heico stock is among the first aerospace stocks to rebound.
Top Aerospace Stocks To Buy Or Sell: Tesla
I know what you are thinking, Tesla (TSLA Stock Report) is not an aerospace stock. But traders are looking for a connection here. That could simply be due to the fact that SpaceX is managed and partly owned by Elon Musk. As SpaceX is not yet a publicly-traded company, retail investors may be looking for a stock that is connected to Musk.
“In the past, Tesla shares have traded around SpaceX launches,” Baird analyst Ben Kallo wrote in a May 27 note. “Importantly, the SpaceX launches were a larger driver of share performance earlier in Tesla’s history, when the company’s status as a disruptor and growth profile was less established.”
The trend of SpaceX launches influencing Tesla’s stock price apparently still continues now. This is even as Tesla has cemented itself as a serious player in the auto space. Nevertheless, it is not clear if activities of SpaceX could influence Tesla’s business in any material way. Yet, as SpaceX continues to make history as a space exploration company, will TSLA stock continue to benefit from the halo effect?