Shares of BlackSky Technology (BKSY +1.57%) launched into orbit this week, closing Wednesday's session with a 97% gain. The reason for the spike is that the company was one of three chosen by the National Reconnaissance Office (NRO) for what the government agency described as its "largest-ever" commercial imagery contract.
Details were sparse, but the press release from the agency, which is housed within the Defense Department, includes wording stating the contract is "valued at billions of dollars over the next decade" and that this marks a "historic expansion" of the NRO's "acquisition of historic imagery" to meet rising demand. CEO Brian E. O'Toole said the new NRO contract is the company's largest ever.
What is BlackSky?
BlackSky maintains a fleet of satellites -- 14 so far -- providing high-frequency imaging, monitoring, and analytics to its clients in the governmental and commercial sectors. High-frequency imaging means BlackSky's satellites and the growing network of internet-enabled sensors work to create high-resolution satellite images of the desired area multiple times a day.
BlackSky says its satellites revisit these targeted areas 15 times a day, giving customers the ability to monitor patterns and activity with newfound accuracy. The company's goal is to build a SAAS-like (software as a service) business with a strong recurring revenue base. Examples of use cases for BlackSky's service include monitoring port activity, tracking maritime commodity routes, crisis management, and monitoring global infrastructure.
On the last earnings call, O'Toole explained that the company's offering is differentiated in that "Today, using our platform, any customer can log in, task the constellation, and have imagery and analytics delivered to their inbox in roughly 90 minutes or less, all fully automated." The company is growing revenue, with a record $13.9 million in sales, representing a 91% increase from the year-ago period.
However, the company also reported a net loss of $20 million and looks to be a long way from profitability. A positive note is that the company does have about $1 of cash per share on its balance sheet, which is a significant amount when shares are priced at $2.44.
Image source: Getty Images.
Validation of strategy
The awarding of the contract comes as welcome news for BlackSky and its shareholders. While the precise dollar amount of the contract was not immediately clear, the award does two things for the company: It gives it a longer cash runway to operate with and helps validate its offerings and business model. This vote of confidence from the NRO adds to BlackSky's credibility with other potential governmental and private customers.
As O'Toole stated in a blog post published after the news broke: "The contract value is significant, but if there were a bigger point, it would be that this award validates our strategy for a high revisit monitoring platform that provides dynamic monitoring of the most important and strategic locations in the world."
NYSE: BKSY
Key Data Points
Cautious optimism is the best approach
This is a great development for BlackSky, but for investors interested in the company, cautious optimism is probably the most prudent approach. While a share price gain of nearly 100% in a day is certainly intriguing, the stock is still down by over 75% over the past year.
In September, the company went public via a merger with a special purpose acquisition company (SPAC) called Osprey Technology Acquisition Corp., initially surging as high as $14.99 per share on excitement about the deal. But since then, shares have traded for as low as $1.00 as investor enthusiasm for SPACs has cooled, and the broader market sentiment toward pre-earnings "story stocks" has soured.
For interested investors, a prudent approach would be to initiate a starter position in BlackSky now and then dollar-cost average your way to a position of the size you want over time. This is a small-cap, early-stage company, so there will likely be more days of outsized gains and losses ahead for the stock.
