In January, Space infrastructure specialist Redwire (RDW -5.69%) announced a transformational deal and inked a high-profile partnership. Investors were excited, sending Redwire shares up 45.3% for the month, according to data provided by S&P Global Market Intelligence.
A busy month of deals
Redwire is a private equity-formed company focused on building rocket components, payloads, and other space infrastructure. In January, Redwire announced a $925 million acquisition of privately held Edge Autonomy.
Company officials said the deal would "transform Redwire into a global leader in multi-domain autonomous technology," helping to broaden its exposure to the defense industry. Although Redwire is primarily focused on building infrastructure for space, the addition of Edge could help the company get involved in future competitions for military drones.
Days later, Redwire announced a new partnership with Virgin Galactic Holdings that calls on Redwire to manufacture research payload lockers for Virgin's forthcoming Delta-Class spaceships. The lockers will help Virgin Galactic to offer more advanced low-gravity research capabilities to scientific customers.
Put it all together, and one could argue that Redwire went a long way toward maturing into its potential in January. Late in the month, investment bank B. Riley upgraded the shares to a buy from a neutral, further encouraging investor enthusiasm.
Is Redwire a buy?
Redwire shares are now up 688% over the past 12 months. That is a sharp turnaround for a stock that, in early 2023, traded about 80% below its September 2021 initial public offering (IPO) price.
During that time, Redwire has evolved from a good idea with potential to a functioning company that is aggressively pushing into new markets.
The potential is certainly there, but Redwire is now valued by the market at more than $1.5 billion, despite recording just $300 million in revenue over the past 12 months. That revenue number is likely to go higher in the years to come, perhaps justifying that valuation, but new defense and space projects tend to take time to complete, and the revenue ramp will not happen overnight.
Investors are right to be excited about what Redwire has become, but the company will likely need time to digest the Edge deal and scale up manufacturing for new deals like the Virgin Galactic pact. Therefore, given the complexities of the space business, as well as the current sky-high valuation assigned to Redwire shares, this stock is better suited for a watch list than a buy list right now.
