2 High-Flying Space Stocks Are Expected to Plunge Up to 56% in 2026, According to Select Wall Street Analysts

McKinsey forecasts the space economy will nearly triple from $630B in 2023 to $1.8T by 2035. Analyst low-water targets imply material downside for retail-favorite names: Scotiabank's $41.20 target implies ~56% downside for AST SpaceMobile, and BofA's $9.50 target implies ~50% downside for Intuitive Machines. Risks cited include premium valuations, launch cost inflation and delays for AST, and Intuitive Machines' early-stage cash burn (FY net loss $83.3M; $14.3M net cash used in operations) plus competitive pressure on government-contract margins.

Analysis

The immediate market story prices pure-play satellite operators for flawless execution and rapid unit-cost declines; that creates a non-obvious funding/strategy arbitrage where mobile network operators (MNOs) and spectrum owners can act as both gatekeepers and rent-extractors. If MNOs choose to slow commercial rollouts or insist on revenue-share models, thin-margin hardware integrators will see ROI pushed out by multiple years, amplifying dilution pressure and making supplier payment terms the critical margin lever.

A second-order supply-chain effect: launch cadence and insurance cost variability turn into operating leverage for platform owners (spectrum/ground infra) rather than satellite builders. Falling launch costs benefit firms with scale in manifesting capacity, but uneven cost deflation amplifies winner-take-most dynamics and concentrates cash-flow to launch integrators and spectrum holders.

Catalysts to watch in the next 3–18 months are (1) quarter-by-quarter cash-burn profiles and disclosed financing plans, (2) MNO commercial trial terms (pricing, revenue-share, minimum commitments), and (3) any material launch delays or insurability events. Tail risks include a retrenchment in capital markets that forces distressed asset sales and government procurement repricing; conversely, rapid launch/insurance cost declines or a large exclusive MNO anchor deal would materially re-rate survivors.

Given elevated retail positioning and gamma, prefer asymmetric option structures and cross-sector pairs rather than naked longs. The consensus underestimates the bargaining power of spectrum/ground infrastructure owners to capture economics and the time it will take hardware-centric names to prove sustainable unit economics — this argues for owning infrastructure/finance-exposed names and hedging or shorting execution-dependent builders.

Key Decisions for Investors

• ASTS: Initiate a bearish, limited-risk options position — buy Sep-2026 put spread (6–9 month horizon). Risk = premium; reward ~3–5x premium if shares undercut execution expectations (>30% downside). Use size 1–2% notional given retail gamma risk.
• LUNR: Buy 12–18 month put spread or long-dated puts to express cash-burn / contract-pricing downside. Target asymmetric payoff: max loss = premium, anticipated tail return if a key contract runway or cash raise misses (potential >40% repricing).
• Pair trade (6–18 months): Short ASTS equal-dollar / Long SATS (EchoStar) — rationale: spectrum and ground infra capture pricing power and recurring cash flows while pure-play device/satellite integrators face dilution. Size neutralize market beta; stop-loss at 25% adverse move.
• Balance/defensive: Add small position in BNS (12–24 months) or bank credit playing financing of infrastructure deals — low expected upside but stable income and upside if M&A/financing activity accelerates. Keep allocation conservative (1–2% portfolio).