Analysts at Craig-Hallum have upgraded BlackSky Technology Inc. (NYSE:BKSY) from Hold to Buy, maintaining their price target at $10.
The upgrade is based on the company's recent capital raise of $46 million, which is expected to help BlackSky achieve free cash flow (FCF) breakeven around 2026. The firm notes that the additional funds provide BlackSky with more flexibility, even if they decide to reduce capital expenditures.
According to the analyst, BlackSky's stock presents a highly attractive risk/reward ratio, trading at approximately 1.4 times its revenues and seven times the firm's projected 2025 EBITDA. This valuation comes despite the company's uneven guidance and execution, which the analyst believes is already accounted for in the current stock price.
The firm acknowledges that BlackSky has had its challenges with inconsistent guidance and execution but suggests that these issues are reflected in the stock's valuation. With the recent capital infusion, BlackSky is seen as having a more solid financial footing to support its operations and growth strategy.
Craig-Hallum points to several potential catalysts for BlackSky's shares, specifically mentioning mega-deals in the pipeline that could positively impact the stock. The firm's outlook on BlackSky is optimistic, with the expectation that the company will have the necessary cash to sustain itself until it becomes FCF positive.
In other recent news, BlackSky Technology Inc. has seen significant developments in contracts and revenue. The company was awarded a five-year contract by the National Geospatial-Intelligence Agency, potentially valued at up to $290 million, for satellite imagery and AI analytics.
Additionally, BlackSky secured a contract expansion worth approximately $6 million with an international defense customer, bringing the total annual commitment to nearly $18 million. In terms of financial performance, BlackSky reported a 29% year-over-year revenue growth in the second quarter of 2024, totaling $24.9 million.
The firm also received a multi-year contract from NASA, potentially worth up to $476 million, and a U.S. Navy research contract for advanced optical intersatellite link terminals integration into its Gen-3 imaging satellites. In market analysis, H.C. Wainwright upgraded its price target for BlackSky's stock, maintaining a Buy rating, a sentiment echoed by Lake Street Capital Markets.
Lastly, BlackSky announced a public offering of its Class A common stock priced at $4.00 per share and approved a 1-for-8 reverse stock split of its Class A common stock.
InvestingPro Insights
Recent InvestingPro data and tips provide additional context to Craig-Hallum's upgrade of BlackSky Technology Inc. (NYSE:BKSY). While the analyst's outlook is optimistic, InvestingPro metrics reveal a more nuanced picture of the company's financial health.
BlackSky's impressive gross profit margin of 69.14% for the last twelve months as of Q2 2024 aligns with the analyst's positive view. This robust margin could support the company's path to profitability. However, an InvestingPro Tip cautions that BlackSky is "quickly burning through cash," which underscores the importance of the recent $46 million capital raise mentioned in the analyst report.
The company's revenue growth of 43.02% over the same period is noteworthy, potentially supporting the analyst's bullish stance. Yet, another InvestingPro Tip indicates that BlackSky "may have trouble making interest payments on debt," which could be a concern for investors despite the recent capital infusion.
For readers seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on BlackSky, providing a deeper understanding of the company's financial position and market performance.
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