First Goldman Sachs issued an optimistic report on space investment. Then Morgan Stanley gave its upbeat space review. And now Merrill-Lynch/BOA has released a report of its own: To Infinity And Beyond – Global Space Primer (pdf).

A Transforming World: Space

As part of our work on a Transforming World we introduce a new Innovation-focused theme that looks beyond our planet – Space. Our Primer sets out the challenges and opportunities posed by Space. We also publish an accompanying Primer Picks report.

Space Age 2.0: the race for the final frontier

We believe that we are entering an exciting era in Space where we expect more advances in the next few decades than throughout human history. The original 20th century Space Race was all about the Cold War superpowers, and military/defense interests (US DoD) will remain a key driving force of the new Space Race. However, we see a raft of new drivers including private company innovation (SpaceX reusable launch), commercial activity (3/4 of the Space industry), the involvement of new countries (80+ countries with satellites in orbit), and falling launch costs (Rocket Lab – US$5mn). Stakeholder support remains strong (7/10 Americans rate NASA favourably) as does the regulatory backdrop (SPACE Act 2015, Trump administration).

US$339bn space market today: US2.7tn by 2045E

It has traditionally been difficult for companies to make money from Space, with high capex requirements and frequent delays. However, for those wishing to take a truly longterm time horizon we see it as one of the final frontiers of investing. The market is expected to grow from US$339bn in 2016 to US$2.7tn by 2045E. Over US$16bn has been invested in Space start-ups since 2000, with 2016 seeing a record US$2.8bn.

Multiple (re)entry points: defense, launch, satellites

Beyond the involvement of 16 of the world’s richest billionaires, we see several “terra firma” opportunities including: defense & contractors, satellites (77% of market), launchers (US$5bn+ market) and insurance (US$30bn in exposure). National space agencies (NASA, ESA, etc) and military programs (US Air Force) together with incumbent Aerospace & Defense companies/JVs (United Launch Alliance, Arianespace) will continue to dominate, in our view (50+ years of technological expertise). Private companies and commercial space players will ride their coat-tails but play a growing role (SpaceX, Blue Origin, etc). We also explore a number of unproven “moonshot” projects (e.g. space tourism, intercity rocket travel, asteroid mining & deep space/interstellar exploration).

Risks & challenges: the dark side of space

There remain significant risks and challenges to investing in space and several technical hurdles to overcome before “lift off”. Beyond the capex requirements, technical risks to the new Space Race include: unprofitability (low margins/returns), failed launches (1/20 chance), safety concerns and regulation. Outer space risks include space debris (170mn pieces in orbit) and solar storms (up to US$2.6tn in losses).

BofAML Space stock exposure & Primer Picks

We present a list of 70+ global stocks covered by BofAML that have exposure to Spacerelated solutions including: space launchers & systems, space satellites/high tech, space insurance, space manufacturing/printing, space materials, space contractors & “moonshots”. Our Buy-rated stocks with material exposure to the theme are detailed in an accompanying Primer Picks report, as is our full stock list.

See also the review by CNBC: The space industry will be worth nearly $3 trillion in 30 years, Bank of America predicts

• Bank of America Merrill Lynch sees the space industry growing to $2.7 trillion in 30 years.
• The firm’s expectation is nearly triple Morgan Stanley’s estimate of $1.1 trillion by 2040.
• “A raft of new drivers,” BofAML says, are pushing the “Space Age 2.0.”