Three European small caps to watch with the space economy taking off

Enthusiasm around the space sector has surged following SpaceX's IPO. On June 12, Elon Musk's company listed on the Nasdaq, raising $75 billion at a valuation of around $1.77 trillion. The listing was the largest IPO ever. The VanEck Space Innovators ETF gained as much as 97% in the first months of 2026, although by late June its advance had moderated to around 30% year to date.

The rally has also led investors to revalue many publicly traded space companies. A significant number remain unprofitable, yet investors are willing to pay a substantial premium for their stocks in anticipation of continued growth in the space economy.

Interest in the space sector is being supported not only by the excitement surrounding SpaceX but also by long-term structural trends. Lower launch costs, satellite miniaturization, and the growth of low Earth orbit constellations are driving a market that, according to industry estimates, could reach $769 billion by 2030.

In Europe, the sector is receiving an additional boost from government programs. The European Space Agency has launched the EUR900 million European Launcher Challenge, under which it is funding five private launch companies. One of the program's key requirements is that participants successfully place a payload into orbit no later than 2027.

At the same time, European countries are increasing spending on defense and space technologies. Germany, for example, plans to raise its defense budget to around EUR152 billion by 2029, roughly triple the 2023 level. Space-related projects have become a separate priority, with around EUR35 billion earmarked for them by 2030.

Many of Europe's most promising space startups, however, remain privately held. They include Isar Aerospace, PLD Space, and Rocket Factory Augsburg. On June 15, Isar carried out the second launch of its Spectrum rocket from Norway, with the goal of becoming the first company to place a payload into orbit from continental Europe. Publicly traded satellite chipmaker STMicroelectronics is also noteworthy as a key supplier to Starlink, but with a market capitalization of more than $60 billion, it falls outside of our parameters.

Nevertheless, Europe's public markets still offer several smaller firms that stand to benefit from the growth of the space economy. Below are three ideas investors may want to consider.

Avio (Milan: AVIO)

Avio is one of the purest plays on the growth of Europe's space industry. The company is the prime contractor for the Vega C launch vehicle and also participates in the Ariane 6 program. In effect, Avio is one of the key pillars of Europe's strategy to ensure independent access to space.

In the first quarter, the company's top line increased 19% year over year to EUR128.5 million (around $150.8 million), while EBITDA rose about 30% to EUR5.2 million (around $6.1 million). As of Friday, Avio had a market capitalization of around $1.3 billion.

The main growth driver over the coming quarters could be the expansion of the Vega program and new contracts from the European Space Agency as Europe continues to have a limited number of independent launch providers. This is the key investment thesis behind Jefferies' positive view on the stock, with its "buy" rating reaffirmed in June.

Another advantage is Avio's industrial base and longstanding experience in the sector. The company traces its roots back to 1912 and is now involved in developing the next generation of the Vega rocket family.

The main risk is the company's rich valuation. Its price/earnings ratio is around 89, several times higher than the broader European market average, with the STOXX Europe 600 trading around 19. This suggests that much of Avio's growth potential is already reflected in its share price. In addition, the space industry remains a technically demanding business where a failed launch or delays to a major program can materially affect financial results and investor sentiment.

According to MarketScreener data, the stock has four "buy" ratings versus one "hold." The average target price is EUR43.70 per share, implying 53% upside.

OHB SE (Frankfurt: OHB)

OHB is Europe's largest publicly traded satellite manufacturer. The company produces satellites for navigation, communications, and Earth observation, working primarily with government clients.

In the first quarter, total operating performance, the metric OHB uses as its key indicator of activity on long-term projects, was up 15% year over year at EUR279 million. The order book reached a record EUR3.4 billion, up 45% from a year earlier. New orders were around 1.6 times quarterly revenue, pointing to continued strong demand. At the same time, according to a number of analysts, the company's current results do not yet reflect the expected pickup in European defense spending.

Another positive for investors is the change in the company's capital structure. Before a June share offering, only 5.7% of the stock was free floating; following it, the free float is expected to rise to around 19.2%. That should improve liquidity and could attract more institutional investors. However, the risk remains that even after, the free float will still be relatively small. After the stock gained more than 450% over the last 12 months, it could continue to experience significant volatility due to capital inflows or outflows, including from thematic funds.

NuWays analyst Simon Keller raised his target price on OHB to EUR320 per share from EUR272 per share in May while maintaining a "buy" rating and forecasting average annual earnings per share growth of 39% through 2030 (the research note has been seen by Oninvest).

GomSpace (Stockholm: GOMX)

GomSpace is the smallest and the riskiest company in this selection. The Danish manufacturer develops nano- and microsatellites, as well as key subsystems including power, communications, attitude control, and onboard management systems. The company also designs satellite platforms for government, defense, and commercial clients.

In the first quarter, revenue increased 43% year over year to SEK127 million (around $13.2 million), while adjusted EBITDA rose 22% to SEK13.8 million. New orders doubled during the quarter, bringing the order book to around SEK390 million (around $40.5 million). For the full-year 2026, GomSpace forecasts revenue of SEK540-650 million (around $56-68 million) with an EBITDA margin of 5-12%. At the same time, the company expects negative free cash flow as it continues investing heavily in expanding production capacity to capitalize on the growth of the European space market.

Another source of upside is its agreement with Ukrainian company STETMAN to develop a sovereign satellite communications system similar to Starlink, a project that could be partially be financed by the EU.

Still, GomSpace is hovering around breakeven, while a significant portion of its working capital consists of overdue receivables. One undisclosed customer owes the company around SEK150 million (approximately $15.6 million). While the collateral has been received and the management is confident in payment, Redeye analysts do not expect the money to be received in the near term.

This text is for informational purposes only and does not constitute personalized investment advice.