Space Investors Urged to Get Their Heads in the Clouds

(Bloomberg) -- If you know nothing about what's happening kilometers above the clouds, maybe you should.

While investors prefer sectors with nearer-term benefits, space is an area Morgan Stanley anticipates will see "significant development." Several recent events support the potential to transition investments in the global space economy from what is mostly the private equity domain to the public equity domain, writes a Morgan Stanley team of analysts, including Adam Jonas and Rajeev Lalwani, in an August 23 note.

These developments include: Space Force potentially becoming the sixth branch of the U.S. Armed Forces; NASA announcing crews for manned flights to the International Space Station on U.S. rockets; rapidly developing space capabilities from China; rising concerns about Russia's satellite maneuvers; a number of airplane-borne rocket launchers becoming prevalent, and more.

Space is a more than $350 billion economy, Jonas says, but the industry has room to expand to $1.1 trillion by 2040. The charge is being driven by national security and, more specifically, "tech communications," with an upward lift from wireless data usage.

Two-thirds of Morgan Stanley's revenue forecast is derived from the Internet, consumer broadband and ground equipment markets, Jonas wrote in an earlier note, which was reconfirmed by Bloomberg News. All of these underscore Jonas' call on 20 stocks poised to leverage the growth of the global space sector: Adobe, Alphabet Inc., Analog Devices, Amazon.com Inc., Apple Inc., Boeing, Facebook Inc., GoDaddy Inc., Honeywell, Inmarsat, Intuit, Lockheed Martin, Microsoft Corp. Northrop Grumman, Qualcomm, SES, Shopify, Softbank, United Technologies, XL Group

"Add the mounting number of developments and commentary from governments on the subject, and we believe investors cannot be too early in at least understanding this rapidly evolving topic," Jonas wrote in the October 2017 note.

To contact the reporter on this story: Kamaron Leach in New York at kleach6@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Scott Schnipper

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