A powerful earnings report from Rocket Lab propelled space stocks higher on Wednesday. The tiny rocket company reported better than 50% sales growth in its third quarter of 2024, and promised to basically double that growth rate in Q4.
Is it any wonder space investors are excited?
As of 12:45 p.m. ET, shares of Spire Global (NYSE: SPIR) are up 22%, while AST SpaceMobile (NASDAQ: ASTS) stock is gaining 22.1%, with Planet Labs (NYSE: PL) bringing up the rear with "only" a 14.5% gain.
Planet Labs and AST SpaceMobile
AST SpaceMobile is scheduled to report its own earnings tomorrow afternoon, with Planet Labs following up with its report in the first week of December. Investors buying both these stocks are presumably taking a cue from Rocket Lab's report, and betting on similarly big news from the other space stocks.
Whether that hope will be fulfilled remains to be seen. It's worth pointing out that neither of these companies is believed to have earned a profit over the past quarter. But then again, neither did Rocket Lab, and that fact's not slowing it down one bit today.
Spire Global's big news
As for Spire, the situation is a bit different. Like AST and Planet Labs, it's got an earnings report coming soon -- Nov. 25, according to data from Yahoo! Finance -- and optimism over that report, fueled by Rocket Lab's good news, is probably part of the reason Spire is going up today as well.
An even bigger reason for Spire's share price spike, however, is the news it just announced: Spire has agreed to sell its maritime ship-tracking business to privately held commodity data and analytics platform Kpler for $241 million. According to Spire, this price values the business unit at approximately 5.8 times trailing revenue. In its announcement, Spire noted that the proceeds from this sale will allow it to pay off all of its debt.
The news is actually even better than that, though. With $64 million in cash at last report, and only about $131 million in debt, the $241 million Spire will get from this sale will suffice to pay off the debt, and leave Spire with a sizable cash cushion to ease the company's path toward profitability.
What will Spire stock look like post-sale?
Spire says it plans to reinvest the extra cash in its remaining "aviation, weather and space services" businesses, as well as in "the existing U.S. government portion of its maritime customer portfolio."
That all sounds pretty good. Still, knowing the value of the transaction ($241 million) and the price-to-sales ratio (5.8x), we can calculate that Spire is selling off approximately a $41.6 million annual stream in this transaction -- nearly half its business. With $107.2 million in total trailing revenue, that means that post-sale, Spire will only have about $65.6 million in annual revenue coming in.
Should you buy or sell Spire stock now?
At $338 million in market capitalization at last report, this means that Spire is going to be valued at about 5.2 times annual revenue post-sale -- a bit pricey for an average unprofitable space stock, but not too out of whack with current valuations, which are really all over the map. Planet Labs for example, costs only 3.2 times sales, while Rocket Lab sports a P/S valuation approaching 22, and AST SpaceMobile costs well in excess of 1,900 times sales.
Granted, it still remains to be seen if (1) this sale will go through and (2) what effect it will have on Spire's path to profitability. On the first question, we shouldn't have too long to wait, because Spire and Kpler hope to close the sale in Q1 2025. On the second question, well, most analysts weren't expecting Spire to turn profitable before 2027 at the earliest, even with its maritime business, and not until it was generating well in excess of $160 million in annual revenue.
The revenue part of that equation just got set back quite a bit. We'll just have to wait and see what that means for Spire's prospects for turning profitable.
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Rich Smith has positions in Planet Labs Pbc and Rocket Lab USA. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
