BlackSky Technology: Increasing Competition Could Be A Problem

Richard Durant profile picture
Richard Durant
7.51K Followers

Summary

  • BlackSky Technology is a geospatial imagery company with exposure to growing demand in defense and government applications.
  • Competition in the high-resolution satellite imagery space is increasing, with BlackSky facing competitors like Planet Labs and Maxar.
  • While BlackSky could be considered reasonably priced given the size of the imagery opportunity, the company may need access to capital and there is a risk of commoditization.

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BlackSky Technology (NYSE:BKSY) is a geospatial imagery company that is still in the process of building out its space infrastructure. While the company has a large market opportunity, there are questions around capital requirements and competition. Defense

This article was written by

Richard Durant profile picture
Richard Durant
7.51K Followers
Richard Durant is the leader of Narweena, an asset manager focused on finding market dislocations that are the result of a poor understanding of a businesses long-term prospects. Narweena believes that excess risk adjusted returns can be achieved by identifying businesses with secular growth opportunities in markets with barriers to entry. Narweena’s research process is focused on company and industry fundamentals with the goal of uncovering unique insights. Narweena has a high risk appetite and a long-term horizon, in pursuit of stocks that are deeply undervalued. Coverage tilts towards smaller cap stocks and markets where competitive advantages are not obvious.Investments are driven by a belief that an aging population with low population growth and stagnating productivity growth will create a different opportunity set to what has worked in the past. Many industries are likely to face stagnation or secular decline, which counter-intuitively may improve business performance if competition decreases. Conversely, other businesses are likely to face rising costs and diseconomies of scale. In addition, economies are becoming increasingly dominated by asset light businesses, and the need for infrastructure investments is declining over time. As a result, a large pool of capital is chasing a limited set of investment opportunities, which is driving up asset prices and compressing risk premia over time.Durant has undergraduate degrees in engineering and finance from the University of Adelaide (Honors) and an MBA from Nanyang Technological University (Dean’s Honors List). He has also passed the CFA exams.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (4)

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Jamm Systems profile picture
Jamm Systems
25 Jul. 2024, 3:12 PM
All of these companies are in a tough spot IMO. They are cap ex heavy, but don't charge enough for their data and services to justify the investment. And their market just isn't that big- yet?! They'll need some sort of new applications for this to make sense. I'd expect BKSY to need to do a raise either this year or early next- probably this year. That sucks when your share price is just over a buck.

What would make a ton of sense is if BKSY merged with PL. Or if they were acquired by somebody- SpaceX??
e
engineeringvirtue
26 Jun. 2024, 9:47 AM
BKSY has undoubtedly been an investor disappointment. It's hard to find a fair evaluation of its future....
Gtoz profile picture
Gtoz
26 Jun. 2024, 8:57 AM
Planet labs to slash 180 employees, which represents ~17% of the firm's total workforce. So their growth is a problem. Whether this could be a bad sign for BlackSky, time will tell.
H
Hugh Arhue
26 Jun. 2024, 8:15 AM
Thank you author for a refreshing look at $BKSY and the company estimated TAM.
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