Three space stocks are catching my attention at the moment. BlackSky Technology (NYSE: BKSY), Spire Global (NYSE: SPIR), and Redwire (NYSE: RDW) have all rebounded from their lows post their initial public offering and are currently trading at favorable price points, ranging between two to four times trailing sales.
Based on historical valuations, this pricing seems suitable for space stocks that are not yet profitable. Lockheed Martin’s recent acquisition of Terran Orbital for 3.3 times sales further supports this evaluation.
While there is no guarantee that these stocks will become profitable, I believe that their current valuations make them attractive for investment, either until they are acquired or until they become profitable in the future.
Here’s an overview of each company:
BlackSky Technology:
With a market capitalization of $338 million, BlackSky is considered the most affordable among the three. The company, with 16 satellites in orbit, specializes in Earth observation services, providing real-time intelligence by capturing images of Earth multiple times daily for government and commercial clients. While primarily serving U.S. government agencies, BlackSky also caters to international clients and corporate partners like Palantir. Despite its small revenue of $107 million and operating losses of $42 million, BlackSky has a healthy cash position of $63 million, sufficient to support its growth trajectory and potentially achieve positive free cash flow by 2026.
Spire Global:
Spire, another satellite intelligence provider, recently sold its shipping intelligence business for $241 million, leaving it with a diverse portfolio serving the aviation, weather, and space industries. The substantial proceeds from the sale have bolstered Spire’s financial position, allowing it to pay off debts and maintain a significant cash reserve. With a manageable burn rate and a strong balance sheet, Spire is well-positioned to transform its operations into a profitable business.
Redwire:
Specializing in space infrastructure development, Redwire is valued at approximately $800 million, making it comparable in size to BlackSky and Spire combined. Unlike the other two companies, Redwire focuses on constructing components for use in space rather than satellite imaging services. The company’s unique position in the space industry presents growth opportunities, supported by its market valuation and strategic focus on infrastructure development.
These three space stocks offer unique investment opportunities in the evolving space industry landscape.
Redwire stands out as a space company with a promising trajectory towards generating free cash flow, surpassing its competitors in this aspect. In 2023, the company exhibited a relatively low cash burn rate of just a few million dollars. While it is expected that this rate will increase in the current year, analysts foresee Redwire achieving positive free cash flow by 2025. Bolstered by $43 million in reserves, Redwire appears well-positioned to weather the storm until it becomes self-sustaining.
The profitability of space companies like Redwire, BlackSky, and Spire remains uncertain, complicating the task of accurately valuing their shares. BlackSky’s stock trades at a modest 3.1 times annual sales, while Spire commands a slightly higher multiple of 3.4. Redwire emerges as the most attractively priced among the three, boasting a price-to-sales ratio of only 2.7.
While personal preferences may lean towards Redwire as the most promising prospect and BlackSky raising skepticism, the current valuations suggest that all three companies have the potential to not only survive but thrive in the long run.
Contemplating an investment of $1,000 in Redwire prompts a word of caution. The Motley Fool Stock Advisor analyst team, renowned for their astute recommendations, has highlighted 10 stocks as top picks for current investors – with Redwire not making the cut. These selected stocks are anticipated to yield substantial returns in the foreseeable future, akin to the success story of Nvidia which featured on a similar list back in 2005.
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Rich Smith, the author, maintains a neutral stance on the stocks discussed. It is worth noting that The Motley Fool holds positions in and endorses Palantir Technologies while also recommending Lockheed Martin. Transparent in its practices, The Motley Fool upholds a stringent disclosure policy to ensure trust and integrity in its financial analyses.
