Key Points

Virgin Galactic was the first pure-play space stock to go public. AST SpaceMobile and Rocket Lab are the most popular space stocks today. But none of the above are the cheapest. The world's cheapest space stocks are BlackSky, Redwire, and Spire Global.

"Space is hard," goes the one saying. It's especially hard for investors, who have struggled to make money in the nascent space industry ever since it burst into being with the Virgin Galactic IPO more than five years ago.

Initial enthusiasm for space stocks sparked a wave of SPAC IPOs in the sector, but several of those have already failed. Even among the survivors, unprofitable space stocks have faced difficulties in the stock market in recent months. From market-top back in mid-February to today, the ARK Space Exploration & Innovation ETF, for example, has lost 12% of its value -- and was down closer to 25% earlier this month.

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Now, "every cloud has a silver lining" is another great old saying. For investors, the silver lining of the sell-off in space stocks is that a lot of these companies got cheaper to invest in. After the first big sell-off and the recent rebound, investors with $100 or so to gamble on a high-risk, high-reward situation might be able to find some good values in space today.

Opportunities in space

I'm not going to talk about either of the two most popular space stocks today, AST SpaceMobile or Rocket Lab. Although at a market capitalization of $7.5 billion and more than $10 billion, respectively, these are clearly the highest-profile pure-play "space stocks," at valuations of more than 1,700 times trailing sales (AST) and even just 23 times sales (Rocket Lab) -- and with no profits, and so no price-to-earnings ratio -- they're also arguably the two most overvalued space stocks.

Instead, I'm going to focus on the three cheapest space stocks, which are, therefore, potentially -- to my mind at least -- the three smartest space stocks to buy for upside potential. These are:

BlackSky(NYSE: BKSY), Redwire(NYSE: RDW), and Spire Global(NYSE: SPIR).

Time to buy BlackSky?

With a total market capitalization of less than $270 million and a price-to-sales (P/S) valuation of just 2.6, BlackSky stock is arguably the cheapest of the new batch of space stocks at present. That said, it's also cheap for a reason.

Unprofitable today and not expected to earn its first profit before 2027, according to analysts polled by S&P Global Market Intelligence, BlackSky is also in the middle of a cash crunch. Although it's won some nice-size contracts that are bringing money in, the company is burning through about $56 million in negative free cash flow annually, and BlackSky only has about $52 million in the bank. That means it's going to be out of cash in less than a year and will need to either take on more debt (it already has $116.5 million in debt) or sell more stock.

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My hunch is that it will sell stock. But BlackSky might also, potentially, sell itself to a bigger space company and generate a quicker payoff for its shareholders.

Redwire could make you some green

Only slightly more expensive than BlackSky is space infrastructure specialist Redwire. Although Redwire boasts a market capitalization of $863 million, the company also boasts three times BlackSky's annual revenue, such that Redwire's P/S ratio is only 2.8.

Redwire isn't profitable, either, and its cash reserves are even more stretched than BlackSky's, with less than $34 million in the bank at last report. The good news is that Redwire burned less than $24 million last year. The better news is that analyst forecasts suggest Redwire could turn free cash flow (FCF)-positive as early as this year and turn generally accepted accounting principles (GAAP)-profitable by 2026, a year before BlackSky.

Reaching FCF-positive would be a huge accomplishment for Redwire, assuring investors of its ability to continue as a going concern without the need for further stock sales. It would be a major catalyst that could drive the stock price higher, and it could happen this year.Image created by JesterAI.

Spire Global inspires value investors

Last but not least, Spire Global costs $345 million and has a price-to-sales ratio -- now -- of 3.1. Be prepared to see that number change dramatically in a quarter or two, though, because Spire appears to be about to strike a deal that could set its stock up to explode higher.

Spire is in the midst of negotiations to sell its maritime data business to Belgian data company Kpler. Earlier in the year, completion of this deal was in question, but it appears to be back on track now, and a sale could be imminent, yielding a $241 million cash windfall for Spire that would permit it to pay off all its debts, and also fund operations for the next three years (at the company's current burn rate).

Granted, Spire would still be a long way from profitable or FCF-positive. But successfully closing this deal would provide a near-term catalyst that could lift Spire shares significantly. And this catalyst could occur in a matter of months, if not weeks.

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Rich Smith has positions in Rocket Lab USA. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.

The Smartest Space Stocks to Buy With $100 Right Now was originally published by The Motley Fool

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