SpaceX Explosion Benefits a Rival Now, but Clouds Future for Both

NEW YORK (The Deal) -- Orbital ATK (OA) might be the short-term beneficiary of a weekend explosion of a Space Exploration Technologies rocket that was headed to the International Space Station.

But fallout from this most recent crash and others before it could hinder Orbital ATK's longer-term efforts to gain share in the launch business, while complicating the outlook for other companies that rely on these rockets.

Overall, there have been three similar missions that have failed in the past few months, thinning critical supply lines to the International Space Station.


In the near-term, SpaceX's crash could benefit Orbital ATK, as the two primary competitors for a new contract to continue ferrying goods to the space station have now had similar issues and their "respective track records are more equal," Cowen & Co. analyst Gautam Khanna said.

The setbacks could also lead to extra launches under the existing deal, which could help investors get a firmer feel for 2017 earnings.

Some in the aerospace community also think that the weekend crash is a sign that SpaceX is overextending itself as it pushes to master what would be breakthrough technologies such as reusable first-stage rockets. If SpaceX is forced to devote more resources to its fundamental launch business and away from research and development, Orbital ATK and other incumbents would gain more time to develop their own versions of these technologies.

The crash could also delay the initial demonstration flight of SpaceX's ultra-heavy lift rocket, the Falcon Heavy, past its company's end-of-year target. And it is an unwelcome black eye for SpaceX just after the company had won Air Force certification to use its Falcon 9 rocket to launch national security satellites.

But the explosions are a clear reminder that traveling to space is still a dicey undertaking and could cause the National Aeronautics and Space Administration to award contracts to continue to supply the space station to more than just two vendors. Spreading the contract to more vendors would help NASA to mitigate risk, but it would also eat into the potential profitability of the business for Orbital ATK and others.

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