A New Pivot for BlackSky Stock After Six-Figure Contract News
We're taking some profits and going higher as the small-cap name sees a surge.
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About a week ago, here at "Small Caps/Stocks Under $10" I reiterated my $39 target price for Rocket Lab USA RKLB. Incidentally, RKLB is up almost 5% this morning, but that is not what this particular article is about.
In that piece a week ago, I mentioned another "space" name whose stock I was long, BlackSky Technology BKSY, as BlackSky had announced that a launch window had been opened for February 18 (today) for BlackSky's first Gen-3 satellite. This mission was nicknamed "Fasten Your Space Belts" and is meant to add very high-resolution imaging capability to BlackSky's high-cadence, low-latency (big) data and AI-enabled analytics offerings.
At the time, BlackSky CEO Brian O'Toole had commented: "This launch represents a major inflection point for our global defense and intelligence customer base as BlackSky introduces very high-resolution Gen-3 capabilities to our high-frequency, low-latency monitoring constellation. As more Gen-3 satellites complete production, we expect a regular cadence of additional launches over the coming year."
Late last week, news crossed the tape that BlackSky had won multi-year contracts that would include Assured access to subscription-based, low-latency, high-cadence and AI-enabled analytics services. One would think I could type all of that from memory. Not yet, I can't, but I'm getting there.
On that, O'Toole said, "BlackSky’s combined offering will provide India immediate foresight into critical events impacting the nation as it continues to expand its sovereign space capabilities over the next few years."
These contracts have a combined eight-figure dollar value over several years.
Latest BlackSky News
BlackSky Technology announced that the firm had won a six-figure contract from a new strategic international customer to provide immediate, subscription-based on-demand Gen-2 imagery and analytics services as well as comprehensive training on the AI-powered BlackSky Spectra intelligence and analytics platform.
Who Is BlackSky?
In the firm's own words, BlackSky is a Herndon, Virginia headquartered, real-time, space-based intelligence company that delivers on-demand, high-frequency imagery and high-frequency monitoring of the most critical and strategic locations, economic assets and events in the world.
With BlackSky's analytics platform and low-earth orbiting satellite constellation, customers can see, understand and anticipate changes for tactical advantage enabling not just an act fast, but possibly an act first strategy.
BlackSky Stock Fundamentals
BlackSky is still losing money. The firm will not report its fourth quarter financials until March 6. Wall Street is looking for an adjusted EPS of $-0.27 or GAAP EPS of $-0.31 on revenue of $24.23 million. The top-line print is only expected to be good for a year-over-year sales contraction of 4%. However, over the following three quarters, year-over-year sales growth is projected at 18%, 23% and 46%, in that order.
The last balance sheet we have is from September, so it is dated. Operating and free cash flows were slightly negative for the third quarter, but not tremendously so. For the 12 months ended last September, BlackSky generated operating cash flow of just $-6.2 million, while spending $48.5 million in capital expenditures.
As for that September balance sheet, the firm had a cash position of $63.2 million and current assets of $106.5 million. Current liabilities added up to $18.8 million, of which a minute portion was in short-term debt, but more importantly, $4.2 million was in unearned revenue (not a true financial liability). This put the firm's current ratio at a very strong 5.66 and adjusted for that unearned revenue at a beastly 7.29.
Total assets amounted to $245.5 million, of which just $10.3 million was in intangibles. Total liabilities less equity came to $135.2 million, which did include long-term debt of $98.4 million. That's not out of control but will require positive cash flows to either whittle down, or refinance on advantageous terms.
My Thoughts on BlackSky Stock
This firm is just starting to gain some traction and just starting to turn the corner. The stock is up more than 19% on Tuesday morning, so this is not the day, in my opinion, to chase. We'll likely have a down day in this name this week, that may provide a better point of entry for those not already wearing a few of these shares.
The current situation is fine, so there is no internal fiscal crisis at the firm. The long-term debt load is something to watch and will, have to be dealt with. Having Rocket Lab USA for a partner is not a bad thing. As readers know, that has been our space name for quite some time.
Readers will see the cup-with-handle pattern that stretches from last August into early 2025. This move that took root in January, is the breakout from the $12.50 pivot created by that pattern. My target price was $18 on this trade, so while I am still a believer, I will shave the position on Tuesday's strength. By no means does that mean I am exiting the name.
My new pivot is now the upper trendline of the Pitchfork model. The stock is trying to break out from that line today. Should the line be held, our new target will be $23. In the meantime, I will likely add whatever I sell today in between the 50-day SMA ($12.70) and the 21-day EMA ($15.60).
At the time of publication, Guilfoyle was long RKLB and BKSY equity.
