Better Buy: AST SpaceMobile or Rocket Lab?

In just a few short years, the idea of a space economy has gone from science fiction to reality. Research highlighted by the American Foreign Policy Council estimated that the space economy could reach $10 trillion by 2050.

AST SpaceMobile (NASDAQ: ASTS) and Rocket Lab (NASDAQ: RKLB) have been red-hot on the anticipation of this opportunity. These two space stocks have soared by over 1,500% and 1,700%, respectively, over just the past three years.

Of course, investors now want to know: Which is the better space stock to buy?

Image source: Getty Images.

Both companies are off the ground and headed for orbit

AST SpaceMobile is building a cellular broadband network in space that uses satellites instead of ground-based cell towers. It partners with over 50 mobile network operators worldwide to provide service to nearly 6 billion people in dead zones, such as underdeveloped areas, at sea, or in other areas beyond the reach of traditional towers.

Rocket Lab is an end-to-end space company that provides rocket launch services, satellites, and on-orbit services. The company broke into the industry with small-lift launches and is developing a reusable rocket for medium-lift payloads. Additionally, Rocket Lab has secured government contracts to build missile-tracking and defense satellites for the U.S. Space Development Agency.

Both companies have begun generating meaningful revenue, and Wall Street analysts expect rapid growth over the next couple of years.

Data by YCharts.

But which is more likely to create value for shareholders, and therefore, the better buy?

Both stocks have similar market caps today, with AST SpaceMobile stock at $33 billion and Rocket Lab at $37 billion. Assuming analyst estimates prove accurate, the stocks respectively trade at 42 times and 31 times their 2027 revenue, so neither stock qualifies as a bargain.

Both companies also have some risks to their near-term growth. AST SpaceMobile must continue successfully launching satellites into orbit to build its constellation. At the same time, Rocket Lab has already had to work through setbacks with its upcoming reusable medium-lift Neutron rocket and, once finished, must still go head-to-head with SpaceX, the current industry giant.

What's appealing about Rocket Lab, however, is the company's progress across its business. For instance, it recently secured a new $190 million contract for 20 suborbital launches of Rocket Lab's HASTE rocket to test hypersonic flight technology for the U.S. military's MACH-TB program. Meanwhile, its satellite contract with the Space Development Agency could be worth up to $816 million. The company is clearly making inroads with the government, which offers several paths to long-term growth.

When you combine that with a lower stock valuation, Rocket Lab emerges as the better buy.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AST SpaceMobile and Rocket Lab. The Motley Fool has a disclosure policy.