A host of space companies went public in the SPAC 2020-2021 war, but the past year has been brutal for extraterrestrial stocks, opening the door for investors to hunt for names top age at a reduced price. The SPAC boom hit a wall in 2022, and related space stocks plummeted, regardless of the fundamentals at the core of each company or their often vastly different roles in the economy. growing space. Shares of most space SPACs are down 40% to 85% over the past 12 months, trading much lower than first. Wall Street offers a variety of reasons why dozens of space stocks have been pushed down in price: the market exits riskier assets, a lack of understanding of space-based business models – but above all a bubble SPAC. Among the stocks affected: Astra, BlackSky, Momentus, Planet Labs, Redwire, Rocket Lab, Satellogic, Spire Global, Terran Orbital, Virgin Galactic, AST SpaceMobile and Virgin Orbit. “Everything that used to be SPAC has been wiped out,” said Deutsche Bank analyst Edison Yu. Wedbush analyst Dan Ives emphasized that “the appetite for risk isn’t there, and a lot of these names in the space are getting in on it.” But the global space economy continues to grow at a record rate — reaching nearly half a trillion dollars last year — despite some companies’ mass-market troubles. Private investment, although slower than the previously staggering amount of quarterly flow, continues to move into the industry. While early activities in the space of SPAC names such as Virgin Galactic may have reflected a speculative bubble, the key for investors now is about businesses that are no longer in the growing or Burn high cash, and deliver products that work, said Austin Moeller of Canaccord Genuity. “Some of these companies…have proven startup capabilities [or] the vehicles work, they have real backlogs, they have real customers… and then you helped them deal with other companies in the space that’s still in ‘PowerPoint and info press reports’, I like to call it ‘science,’ says Moeller. CNBC analysis breaks down SPAC stocks in the space into three categories — quality, opportunity, and danger — to explain the differences between companies’ businesses and how investors could soon face them. with a fork in the road as Raymond James Analyst Ric Prentiss told CNBC. a diverse set of operating products, annual sales near or above $100 million, and a management team with a long track record. Shares of Rocket Lab have fallen nearly 50% over the past year, but the analysts’ consensus price target of $13.44 would be, according to FactSet, to more than double the stock’s current levels. The company ranks as the second active US orbiter rocket maker behind Elon Musk’s SpaceX, with its Electron rocket having launched nearly 150 satellites to date. Rocket Lab expands into building satellite and spacecraft components, the bulk of its revenue, and has about $540 million in cash, as well as a backlog of orders totaling more than $500 million. dollars. Alex King, founder of space and technology-focused Cestrian Capital Research, described Rocket Lab as a company with a triple threat: “It’s a low-cost launch service provider that has proven to be successful…CEO [Peter Beck] is a rock star in the industry… and third, financially sound: good growth, well-provable margins, flexible cash, and access to capital when needed,” said King. speak. Planet Labs, whose stock has fallen 40% over the past year, is an Earth-imaging satellite and data specialist, with an average analyst price target of $10 a share and six ratings. buy (not hold or sell), according to FactSet. “I consider Planet as Ives told CNBC. “It’s the space, but the usability is really more like a software subscription model, and I think that’s what really stands out.” Similar to Rocket Lab, Ives emphasizes that Planet is “a proven business model with real non-speculative revenue.” The company has a balance of customers across four main groups – civilian, international rooms and intelligence, agriculture and cartography – and generated $40 million in revenue in the most recent quarter. Notably, Planet earned a significant 10 – year contract from the National Recovery Office naissance. The planet has nearly 200 satellites in orbit, with plans to launch a more powerful new line early next year. Opportunities The SPAC stocks in the middle of this space represent a number of opportunities, but with varying degrees of risk and trade profiles. Possibly the strongest, and also the hardest hit, is Spire. The company’s shares have tumbled nearly 85% over the past year. Even so, Wall Street’s consensus price target is $3.95, or nearly 150% above the stock’s recent price near $1.60. Spire has a constellation of more than 110 satellites in orbit, each with different sensors that collect radio frequency data on weather, navigation, and aeronautics. The company has a growing number of customer subscriptions, with annual recurring revenue reaching $85 million in the most recent quarter. “As far as I know, Spire is the only one with an actual active large constellation [radio frequency] observation satellites, and so if you want anything global done in RF space, then Spire is who you need and the lack of competition I think will help speed their growth.” Cestrian’s King said.King noted that Spire attracted very little attention “despite strong fundamentals,” and Raymond James’ Prentiss said most institutional investors “won’t touch” the stock. shares priced at less than $10 a share, adding that Spire needs to “continue to put one foot in front of the other” and build its subscription Revenue Like Rocket Lab, Virgin Orbit builds small rockets . Virgin Orbit has made four successful launches in a row, twice in 2022 alone. While the company’s cash burn remains high, with adjusted EBITDA losses l At nearly $50 million in Q1, Virgin Orbit has built a contract backlog in excess of $500 million and strong national security through elite relationships, as well as performance agreements. launches from other countries. “There is certainly interest in Congress and its allies in the Pentagon about being able to take the payload … and get it to orbit in a very short amount of time,” said Canaccord Gen.’s Moeller. . Redwire operates in the space infrastructure business and has revenues in 2021 of $137 million. Its shares have fallen more than 60% in the past year. Jefferies’ Greg Konrad, Redwire’s sole analyst ($11 price target), calls it “by far the most diversified of the bunch.” Cestrian’s King notes that its structure, which is a combination of many smaller companies, has caused delays in reporting results due to “complexity in accounting”. That difficulty, “arising from rolling up, will probably continue to feed them for a while,” said King. Terran Orbital is a spacecraft manufacturer that was among the last of this group to complete the SPAC process. Similarly, its stock is down nearly 60% over the past year. According to FactSet, the Wall Street consensus target is $12.40 a share, meaning Terran Orbit should triple from current prices. With a contract to build satellites for the Pentagon’s Space Development Agency, Canaccord Genuity’s Moeller sees a “recurring income opportunity” for Terran Orbital to continue producing for the U.S. military as it launches and replaces satellites. pure. Terran Orbital brought in $21.4 million in revenue for its latest quarter, with an adjusted EBITDA loss of $14.8 million and a contract backlog of $224.1 million. Shares in the satellite imaging joint venture BlackSky and Satellogic are down 75% and 50%, respectively, over the past year. BlackSky currently has 14 satellites in orbit. While Cestrian’s King said “BlackSky’s finances are not strong,” the company has won important national security contracts – especially as a part of NRO’s 10-year awards of up to $1 billion. USD for BlackSky. “I think it’s been unproven so far,” King said of BlackSky, adding that the NRO “didn’t need to give that many awards to a small company.” Two Wall Street firms cover BlackSky, both rating this as a buy with a $6 price target, according to FactSet. Satellogic has 26 satellites in orbit, but has minimal revenue in 2021 as it only started selling and providing images last year. The company had $168 million in cash at the end of last year, money it plans to use to grow its network to more than 200 satellites. None of the Wall Street analysts cover stocks. Danger Finally are the space SPAC stocks that all but the riskiest investors are avoiding: Astra, AST SpaceMobile, Momentus and Virgin Galactic. “These are things that have no product today, and are purely speculative,” King said. Astra already has some revenue from its spaceship engine business. But its core small-missile operations were halted after a mission failure forced the company to abandon its existing rocket line and focus on developing a new one. The company reported an adjusted EBITDA loss of $48.4 million for the second quarter, with $200 million in cash. AST SpaceMobile has high aspirations to deliver satellite-to-smartphone broadband, but has yet to launch the BlueWalkers 3 satellite it needs to prove it can deliver. Momentus has had a tumultuous history of management in the run-up to its public launch and is still working to prove that its Vigoride spacecraft can prove it’s entirely capable. Its most recent mission had mixed results, fraught with difficulty but also deployed customer satellites. The company reported an adjusted EBITDA loss of $18.3 million for the second quarter, with $109 million in cash. Virgin Galactic is years behind in launching its commercial space travel business, with the company announcing a delay again earlier this month. Although around 800 tickets have already been sold to passengers, the company needs to achieve flight rates many times higher than what has been demonstrated in testing so far. Virgin Galactic reported a second-quarter adjusted EBITDA loss of $93 million, with $1.1 billion in cash on hand and plans to sell an additional $300 million in common stock. Analysts say the risky and capital-intensive nature of space projects, combined with the need for training in the field, means only a handful of institutional investors are paying attention right now. arrive. “I think it will take time for institutional investors to put in the effort and energy to really develop it,” said Deutsche Bank’s Yu. The space sector will become more prominent when SpaceX’s Starlink business goes public, Yu said, though Musk has said that won’t happen until 2025 — or later. “Maybe one day if SpaceX or Starlink goes public, people will be forced to do more work in this area. But this year there hasn’t been a real catalyst to get people to really hone it. the way they probably should,” added Yu.
