Wednesday, 29 January 2025
by BD Banks
BlackSky Technology (NYSE: BKSY) shares soared 11.2% through 10:55 a.m. ET Tuesday after the company announced it has just signed a “strategic international defense sector customer” (yet to be identified) to a $100 million spy satellite contract.
BlackSky did mention that its customer is “a long-term strategic partner,” so this contract appears to be an extension or an expansion of an existing relationship.
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According to management, the new contract will run for seven years, through 2032, and covers the provision of “reliable high-resolution, low-latency current Gen-2 and upcoming Gen-3 imagery and AI-enabled analytics services.” BlackSky notes further that this customer will be “among the first” of its customers to receive “very high-resolution 35 cm imagery and sub-hourly revisit” rates of new images from the company’s satellites.
However, these additional services will not begin immediately, but only “as those advances become available.” Essentially, the customer appears to be paying up to save its place in line, and secure “priority, long-term access to [Gen-3] capacity” as it becomes available.
BlackSky stock was up as much as 32% earlier today on this news, before giving back most of its gains. Why is that?
A $100 million contract is nothing to sneeze at. Still, it’s important for investors to read the fine print. For example, this isn’t a new customer addition. It’s an existing customer that was already paying BlackSky some money. So the amount of additional revenue BlackSky is getting here, over and above what the customer was already paying, remains unknown. Plus, the $100 million is spread out over a seven-year span. That makes the annual amount closer to $14 million.
That’s still a nice chunk of change in the context of a company that had only $107 million in annual sales before this announcement. It may not be worth an extra 32% in market cap to BlackSky, but the 10% or 11% boost the stock is getting right now?
Yeah, that seems fair to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.