Motley Fool Money - The Looming Constraint of the Space Industry

Episode Date: September 22, 2026

Space, the final (investing) frontier? Space stocks have garnered copious amounts of investor attention as of late, and much of the success of the space economy hinges on a small handful of rocket companies bringing down the cost of launch. That could get much more complicated if SpaceX sunsets its falcon 9 rocket by 2028 as has been announced. Matt, Lou, and Tyler discuss how the industry can respond to such a change and what opportunities or risks is poses. Plus, the rate of dividend cuts is rising and listener questions Have a question? Email us; [e-mail] Tyler Crowe, Lou Whiteman, and Matt Frankel discuss: - SpaceX’s plan to sunset the falcon 9 by 2028 - Who’s ready to step up in the industry - navigating the minefields of the space industry - Look out for dividend cuts - Mailbag: European AI Infrastructure stocks? Companies discussed: SPCX, RKLB, VOYG, FLY, KRMN, CPB, AMCR, CC, GPMT, ONL, UPS, ASML, SIEGY, SBGSY, PRYMY, CRWV, NBIS Host: Tyler Crowe Guests: Lou Whiteman, Matt Frankel Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Space stocks get thrown a curveball. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crow, and today I'm John by longtime full contributors, Matt Frankel, and Lou Whitening. Guys, we're going to get into space stocks today. We're going to talk about potential dividend cuts as well as going to the mailbag. But as we said, starting at the top, let's get into space here. Space stocks have been front and center for investors as of late.

It's gathered a ton of attention, especially after the SpaceX IPO back in May. But I would say the enthusiasm for space started far before that, just to a lesser degree. Now, Lou, I'm going to steal one of your go-to lines here, but space is hard. And while there's a lot of promise here, the timeline when those things may materialize can come into question from time to time. And that was really laid bare recently when there was a somewhat, I wouldn't say shocking, but surprising announcement that SpaceX actually plans to retire its Falcon 9 rocket. in 2028. This has been the workhorse, you could say, of the space launch industry. Lou, guys, is the industry really ready to lose this vehicle in 2028? I know there's a lot of stuff coming, but we haven't really seen a lot of progress yet. Well, there's, I think, a big caveat on that

decision, because that is assuming that SpaceX's internal successor, the Starship, is ready to take over. If it's not, there's no reason why they can't continue it. But to Space, As a size, the Starship is a much larger vehicle, so it's capable bringing a lot more into orbit. So your per ton launch price goes down. So it's just like, you know, it's more efficient to have 30 people on a bus versus 30 people driving a car. So I think that that is the plan. And if it happens, it'll mean that Starship is going to script. If Starship something goes wrong or it's not ready for prime time, I don't think.

you'll see the Falcon 9 retired as planned. So I do think there's at least some wiggle there, and it's kind of upside, not downside, at least in their head. But it is a huge thing for people trying to book now, looking to 2028, because you're kind of booking into an unknown. Yeah, Matt, one of the things that's interesting about this, too, is we're talking about shuttering a vehicle when some of the successors of it, we've talked about like New Glenn, for example,

they had their accident where basically the launch plan, blew up, neutron rocket has been slower to develop. Heart of me wonders is like, is saying that it's going to shut down in 2020, just kind of a feigned response to the market? Yeah, I mean, just see, there are some caveats. Like Elon Musk set some targets for that to happen. Like Lou said, that assumes that the starship is going to be up and running and taking over. And it assumes that they don't need it, really.

If they need it, it's there. It could continue, but I mean, customers can't book the space flights. And it comes at really a terrible time. Like you said, the New Glen rocket, it's been down since May. Vulcan was grounded in February. And it comes at a time when, you know, launch demand is really heating up from a space development agency, one of their program managers, said recently that thousands of satellites are scheduled to launch by 2030, and there simply aren't enough vehicles to launch them.

And that's given what exists in the market now. So it's not a great time to remove one of the main, you know, the main player. Immediately as an investor, we think like how does, who benefits, who loses out here. Like I said, we have the obvious candidates are the publicly traded companies because they very much in the forefront of like investors mind, you know, rocket lab with its neutron rocket, SpaceX, probably to a lesser degree, Voyager and Fireflight. some recent IPOs as well. But those are our only solutions here, like who else could be benefiting that maybe people are thinking about because they're not necessarily public? Well, I think it's more even complicated than that, because even the neutron and what

Firefly are what they're working on, that's not going to replace the Falcon 9. Those are coming in smaller. So there is a real void there that there aren't a lot of people trying to fill, to be honest, because it's the expenses, the complexity of it. So there's a bunch of ways this can go. If SpaceX is right and Starship can come online and it can just be this massive distributor of satellites, there's going to be competition all the way up and down the food chain. But if Starship continues to be delayed or if the kind of demands from NASA and other things, there are going, one of two things has to happen. Either these medium rockets are going to have to be maxed out or the companies that want to. to what lift are going to have to rethink their businesses, rethink their designs for less weight. I think the winners in the near term are companies like Rocket Lab that just have all this capacity at hopefully becoming online and Firefly. But I think, to be honest, I think the real winners are

going to be the companies that have the DoD blessing or the Pentagon blessing because the one thing I'm sure of is that nothing will be delayed on the military side. I think for any company, that I'm looking at, that part of their plan is to book capacity to launch satellites or launch something into space on the commercial side. They are a likely loser or at least delayed. It's going to take longer than they hope just based on this bottleneck. Lose right that I think Rocket Lab is the natural winner here. Now, the stock is priced for that, but the neutron is arriving at, honestly, the exact right time to take advantage, not just of the Falcon 9 not taking orders past 2028, but just to take advantage of the growing backlog of

just demand for launches in general. Other under-discussed winners could be the component suppliers. There's one called Carmen. They're guiding for 57% revenue growth this year, and companies like this, for the most part, trade at much lower multiples than the pure play space stocks like Rocket Lab do. So there are a lot of potential winners, and I totally agree with what Lou said about that. the companies that are backed by the DOD. Just one thing on that, though, too, the problem with the components supplier is that while they have opportunities on the launch side, if this causes delays for the commercial customers going up into space, they aren't going to buy and pay for the components going into their satellite.

So I think it's a kind of pushback. I think the winner, too, here is the engineers, because even if the neutron works, it doesn't compete with the Falcon 9. It's just it cannot. What SpaceX is retiring is larger than the neutron. There is a company, a private company, Taryn, that is trying to build a Falcon 9 replacement. We need to see it going up. But engineers are going to have to figure out how to get these things smaller or to weigh less

or how to they can self-assemble in space. There's going to have to be a workaround, period, because we are just not going to have that heavy capacity unless Falcon Heavy or Starship come through. I've actually been wondering a little bit, the Terran R, that I believe is actually relativity space. I think that's Eric Schmidt's private company that is expected to, maybe not this year or the coming 12 months, but I think it likely will go public sometime sooner than another. So it definitely be one to watch.

And you guys, you really touched on some of the nuances of space here. And I think a lot of people looking at it just say, more stuff goes up, everybody benefits. There's a lot of misconceptions and perhaps misunderstandings. of space. So as we're kind of rounding out this conversation here, like, what would be your message to investors when it comes to investing in space? What are some of these misconceptions that are maybe less discussed risk or opportunities that investors should be aware of? So I'd point to a risk, and it's something I've kind of already said, but there is a lot, there are a lot of business plans that are resting on Starship's ability to capably and reliably

get things into orbit. And they're not there yet. Even when they're ready, there's a lot of internal plans for Starship plus NASA plus DoD plans for Starship. We, I really worry, and this is both on the kind of the side of some companies that are actually building lunar modules and building satellites, but also the component suppliers, like Matt mentioned Carmen, Redwire to companies that are going to sell to these companies. There is a real risk that most of the business plans that are driving a lot of these backlogs will be delayed. and that is going to depend on Starship.

That doesn't mean the companies are ruined, but it does mean that I think investors should set expectations. I hope everything goes well. And there's a case where it'll all go to plan, but I know a lot of great businesses that are just kind of sitting in neutral right now, waiting for Starship. And what we know about, A, space is hard, as you say,

and B, Elon Musk's likes to set aggressive deadlines and then not hit them. There is a real risk that a lot of, these valuations will be just drained over time by this, by a slowdown that I think is inevitable. Yeah, you make a good point about Elon Musk's aggressive deadlines. The Tesla Roadster reveal is happening next week and it was supposed to happen in 2017. So, yeah, that's just one example. But I would say, you know, in addition to that, one of the biggest risks is that with more

things that need to get into space, then there are rockets, which is kind of the simple way of saying what we've been saying. The companies that have the rockets will have the pricing power. So companies whose business model is to get things transported into space could be the losers here. They could see margins kind of compressed, at least in the near term, until the bottle net goes away. It's going to be a fascinating one because the degree of difficulty here is certainly a lot harder than the topic we're going to discuss next, and that's kind of the boring and stodgy dividend stocks coming up after the break.

You just found out that your sales team is at risk of missing quota. Don't panic. Just ask Rippling AI. Since it's built on your real-time people and business data, Rippling AI can pull metrics from Rippling and Salesforce into a meeting-ready dashboard showing quota attainment, headcount plan, and monthly revenue to quota by region. In seconds, you'll see exactly what's behind your quota risk, and fix it before it's missed.

Question answered, action taken, crisis averted. When you have critical business questions that need answers, don't just file a ticket and wait weeks for an outdated report. Describe what you need and have Rippling AI build it instantly from your live people and business data. Whether it's a dashboard with detailed charts or automated workflows with the right triggers, conditions, and approvals. Ready to rule your business? Head to rippling.a.i slash fool to get the only AI built to give you full

visibility and take complex actions across your entire organization. That's R-I-P-P-L-I-N-G-A-I-S-O-O-L. Sign up for exclusive access today, rippling.a-I-S-F-Fool. A few weeks ago, Campbell's, the maker of the most, I would say, the most famous soup label ever made, announce a dividend cut alongside with layoffs and to cost cuts, you know, try to short up the balance sheet, basically the reason anyone actually cuts a dividend these days. It was basically 25 years to the quarter that the Campbell's company cut its dividend,

you know, one of those markers everyone tries to hit with dividend payments. And now, there was a research note that came out. And so far this quarter, 19% of dividend payout announcements have actually been cuts. And it's been the highest in six years. So basically since COVID times is what we're seeing here, higher interest rates, lots of reasons as to why this may be the case. I wanted to use Campbell's specifically because it's an iconic company and use it as a jump jumping off point here because I think it highlights some signals investors use for determining

dividends safety, like dividend streaks that go on for a really long time and iconic brands that aren't necessarily great indicators over the long term. I think this story here is going to be the big takeaway is no dividend streak is safe. And while we're, you as investors, guys, and we do this all the time. When you're looking at companies, because we all have dividend stocks in our portfolios. What are some of those false flags or like those data points that you see that really aren't great signals to finding a quality company that pays a dividend? There are a few flags that I look for. One is I use free cash flow to analyze dividend stability, not necessarily earnings per share. There's a lot of different accounting things that happen

with the bottom line earnings number that don't necessarily reflect the company's ability to keep paying dividends. I was just kind of doing some research for this segment and I found one company who's on an earnings per share basis, their dividend payout ratio was about 70%. And as a percentage of free cash flow, it was about 130%. So that's one thing to look for. And there are some kind of warning signs. One is growing debt load. One is upcoming debt maturity.

We can talk about that more if you want to, but that's one of the biggest reasons that the dividend streaks are coming to an end. And you can see like boards kind of that have streaks, like you mentioned Campbell's, A lot of companies that I follow that have 30, 40-year dividend raise streaks are now just making, like, penny a share dividend increases just to say that they increase them. And when you see boards start to do that, like kind of just giving nominal dividend increases, it's not necessarily a sign that a cut's coming, but it's a sign that the streak might be cracking. I have to say, Matt's right. Yeah, you want to look for just their ability to fund it without taking on debt because all too common companies, if they're risks that they don't have enough cash to pay their dividends. they will take on debt, which is kind of very, you know, that that's short-term thinking.

I want to say, though, one of the issues, I think, with all of this, and one of the things that causes companies to make weird decisions is I almost wish that dividends weren't as automatic as they were. I wish a company could just say, all right, this is our excess cash. We're going to distribute quarter to quarter as we see it. The market punishes that, and we do see dividend cuts is almost always a sign of stress. management teams would have a lot more flexibility and probably run the business better if they could just not have to. It's kind of do what they do with buybacks, where, you know, as the cash is coming in, if we have excess, we will distribute it versus just having, like Matt says, play the game where, all right, well, we don't want to blow our streaks.

We'll just raise it by a penny. To Matt, as you were saying, like debt maturities, we have rising interest rates. I'm sure that that is playing a part here with why it's happening right now, with as long as other, you know, points. of pain. We've seen retail companies struggling a little bit. I mentioned Campbell's at the top here. As you guys have been scouring the world of potential investments and maybe looking for things that are red flags, what are some of the companies you're looking at right now where you're like, hey, I know they pay dividends and they've been pretty reliable for a while, but this is not looking as hot as, you know, the market may be suggesting it that it is.

For one thing, I'm not sure Campbell's made a wrong move. cutting the dividend. Their stated goal is to cut dividends to pay down debt, which at a time when you're seeing so many companies having to refinance debt that they took out during the 2020, 2020, 2021, zero interest era and having to refinance it today. It's not necessarily a bad move to shore up your balance sheet right now. So I'm not saying they made a bad decision. But yeah, there are some others that, I mean, AMCOR is one ticker symbol AMCR. They've raised their dividend for 28 consecutive years. This is the one that I was saying, 133% of free cash flow.

It's a 5.4% yield. Several analysts have come out and said that they're at risk of cutting. Genuine parts is one that's really interesting. GPC, they've increased the dividend for 70 consecutive years, but their dividends really exceed free cash flow right now. It's 134% free cash flow payout ratio compared to 57% two years ago. And a lot of that is debt. So there are others like that, but for the sake of saving time, I'll pass it over to Lou.

Yeah, so a couple I'd look at, Kimors, the chemical company, they cut their dividend last year. I think they could have to do it again. You've seen it throughout the industry, a lot of dividend cuts. This is just a bad environment for them. Other ones I'd look at with higher rates, kind of higher rates and just the business conditions, commercial reits, like the ones that do offices and office mortgages, companies like Granted Point, Orion Office, they look vulnerable right now in my screen. I might catch some flack for this one, but I've mentioned it a couple times before.

Actually, one on my radio is actually UPS. I brought it up and sometimes I get waived off. But everything we've mentioned, you know, payout ratios, they're north of 100%. Cash from operations doesn't cover its dividends. And, you know, interest coverage metrics are all deteriorating. I know that a lot of, there's a lot of people said, oh, it's UPS, they'll figure it out. because they're in the middle of the turnaround plan, but other companies over the 12 months,

that's one that's always been on my radar as a potential dividend-cut candidate that perhaps is a little more controversial than others. Coming up after the break, we're going to hit the mailback. Hey, everyone, quick reminder, if you want to get a question into us, you can email us at Podcasts at fool.com. It's Podcasts within S.

We also left the email in the show description so you can get it there. Always keep it foolish, keep it short enough I can read on air, and we can't give personalized advice. I apologize, I'm going to say this name wrong. comes from Carolus Shimkus. And the question is, hey, guys, love your podcast. We're talking a lot about chips, supply chains,

and a lot of AI-related stuff. As a Hidden Gem podcast, have you found anything interesting in the AI buildout space, specifically in Europe? So I think we might be a little unsatisfying here, but guys, as far as when I look at this, most of the European companies

also happen to be, like, global leaders, and so they're benefiting not just from, you know, Europe's built out, but the U.S. as well. Right, exactly. I mean, the first names come to my list, and it's not very satisfying, but ASMLs, Snyder Electric, Siemens, all of these companies, great European companies that are doing a ton of business in the U.S. and all over the world. Related yesterday, I built out and other things, but I mean, I think whether I was in Europe or in the U.S., I think going with the established companies versus trying to play the fringe of a trend when things are overvalued.

It makes sense to me to use the boring companies. There's other little companies in the weeds. Was it Prismian Group in Italy, does a lot of the high voltage cables? That's been a popular one, Tyler. But I do think just kind of playing the hits here with these pick and shovel makes sense. And those big companies are really good companies. Yeah, I'll second ASML. That's my number one, as the listener put it, AI buildout stock in Europe.

But to get a little more in the weeds, one that I'm watching just recently filed to go public. It's called N-scale. They're essentially Europe's version of CoreWeave. I love these neocloud companies to watch. So, like, CoreWeave, they do kind of like infrastructure as a service for AI companies. They build out data centers. They build out the compute, and then they kind of lease it off to their customers. So it's a great model, I think, as compute requirements go up, at some point, the hyper-exempties.

Scalers are going to need to find, you know, more capital light waves of getting the compute they need. So I love this business. I have no idea how to value them. So N-scale, for example, their revenue was about $141 million in the first half of this year. That grew 1,200% year-over-year. How do, what price to sales multiple is justified by 1,200% year-over-year growth? I don't know. I don't know if you guys do. They have, you know, $141 million in revenue, $56.4 billion. dollars in bookings. So they're impossible to value, but I think they are going to play a big role in the future of the AI buildout.

There's another one that's currently public called Nebius that has a lot of Europe exposure, NBIS. But N-scale is a really interesting one. It's growing very rapidly, more of a Europe peer play. And so the Neo-Clouds are very interesting to me. Yeah. And the only other comment I would give, too, to this is that the development rate in Europe right now is a little bit slower. If you look at, we'll call it Europe's AI champion,

mistral AI. They're, you know, the closest assimily we could say to Open AI Anthropic. I know they're different businesses, but in terms of like the leader in AI in Europe, I would probably say mistral right now, their CAPEX plans or like obligations relative to what we see at Open AI or Anthropic is, right now is orders of magnitude smaller. Development rates are going to be a little bit slower. And it's just by design. They're kind of focusing a little bit more on like physical AI. So for like robotics and things like that, especially manufacturing related. And I'm not saying that it's bad that it's slower, but, you know, the growth opportunities are just going to be not as robust. And for a lot of these companies we mentioned, ASML, Schneider-electic, much of their growth,

at least for the next couple of years, is going to be largely predicated in the U.S. So we can see a buildout in Europe, but it's going to be hard to separate, like, a company that's going to succeed as a Europe-only AI champion in terms of, like, the AI buildout, versus, for example, a company that is supplying the world in this regard. Well, that's all the time we have for today. As always, people in the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers, advertisements or sponsored content and provided for informational purposes

only. To see our full advertising disclosure, please check out our show notes. Thanks to our producer Dan Boyd and the rest of the Motley Fool team. For Lou, Matt and myself, thanks for listening and we'll chat again soon.