NASA's Multibillion-Dollar Bet on the Moon: Good News for Space Companies, and for Taxpayers Too
In as little as five years' time -- nine years, tops -- NASA wants to put American astronauts back on the moon. And that's probably prudent. After all, it's been nearly 50 years since the last time anyone visited it. If NASA is ever to successfully send humans to Mars, it should probably brush up on its extraterrestrial landing skills first -- and the moon is a convenient place to practice.
But how much is it going to cost?
Image source: Getty Images.
Baby steps to the moon
Initially, not a lot. Earlier this year, NASA announced plans to award up to $40 million in contracts to private space contractors to jump-start efforts to develop the technology needed to return mankind to the moon. Last month, the agency upped the ante with a single $375 million contract award to Maxar Technologies to begin building a Lunar Gateway space station to orbit the moon.
Things kicked into higher gear earlier this month, when the space agency awarded a further $253.5 million in contracts to three private companies to develop lunar landers to deliver cargo payloads to the moon's surface, and $45.5 million more to be split among 11 other companies developing spaceships capable of carrying humans from lunar orbit to the lunar surface. Still, if you add up all the awards announced so far, the total comes in well below $1 billion.
It's about to get a lot bigger, though.
One giant leap -- from millions to billions
Last week, CNN interviewed NASA Administrator Jim Bridenstine about the Artemis project to return to the moon, and asked him straight out: "Can you put a dollar amount on [the all-in cost for Artemis]?"
"We're looking at between $20 billion and $30 billion," said Bridenstine, "spread over five years."
Notably, this sum does not include the $12 billion or so that already spent on NASA's over-budget and behind-schedule Space Launch System (SLS) project -- only one of several potential rocket options for sending astronauts to the moon, but the one NASA's spent the most money backing thus far. The "$20 billion to $30 billion" quote is also additional to NASA's base budget of approximately $20 billion annually.
Thus, to pay for Artemis, NASA will have to hit up Congress for a budget increase -- something on the order of $4 billion to $6 billion annually for a minimum of five years. (There's still some skepticism about the agency's ability to get back to the moon in less than a decade, no matter how much money Congress throws at the task.) To which point, Bridenstine admits: "We're negotiating within the administration" to get the necessary funds added to NASA's budget, and will also need to ensure "that our members of Congress are interested and willing to support that effort."
What it means to investors
That being said, if NASA is able to secure the funding required, this will mean billions of dollars in added revenue for America's space companies -- something on the order of a 20% to 30% boost to current NASA spending levels.
To put that in investing terms, a company like Boeing (NYSE: BA) for example -- prime contractor on the SLS rocket-- earns 6.8% profit margins on revenues from its defense, space and security business. Lockheed Martin (NYSE: LMT), in charge of building the Orion space capsule that will fly atop the SLS, earns an even more robust 10.5% operating profit margin on its space business (according to data from S&P Global Market Intelligence). So depending on precisely how much Artemis ends up costing, and which specific companies win the contracts, it's likely Artemis could be worth an additional $272 million to $630 million in space industry profits ... every year ... for the next five to nine years, or longer.
Even for a company like Lockheed, with $5.6 billion in annual profits, or Boeing, with $10.1 billion, these are not insignificant sums.
What it means for taxpayers
And yet, there's good news here for taxpayers as well as for investors. While there's little doubt that America's space companies will profit mightily from their participation in returning humanity to the moon, it's worth remembering that when we first did it in the 1960s and 1970s, the total cost of the Apollo Space Program was approximately $150 billion (in present-day dollars ).
Even if you max out Bridenstine's cost estimate for Artemis, spending $30 billion to go to the moon today still gets us to the moon for an 80% discount to what it cost us to go there last time around. When you look at it that way, Artemis seems like a good deal for both investors and taxpayers.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Maxar Technologies Ltd. The Motley Fool has a disclosure policy.
