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Now that the Fed has pivoted on interest rates, investors are rediscovering small-cap and growth stocks outside of the artificial intelligence (AI) niche. As interest rates decline, startup companies across various sectors and industries that rely on financing to fund their growth are expected to benefit, which is giving many of these smaller, under-the-radar stocks a boost.
However, not all opportunities in these small-cap investments are created equal, and many of them involve heightened levels of risk compared to investing in larger-cap, “blue chip” stocks. Here's a closer look at one up-and-coming stock that Wall Street analysts expect to skyrocket.
About BlackSky Stock
BlackSky Technology Inc. (BKSY) is a geospatial intelligence company that owns and operates a space-based intelligence platform via low-earth orbit (LEO) small satellite constellations, which capture and provide cost-efficient imagery where and when required by its customers. They provide satellite imagery, analytics and high-frequency monitoring that leverage machine learning and artificial intelligence (AI) to provide automated analysis of vessels, ports, aircraft, airfields, and buildings for commercial customers.
Valued at $797 million, BKSY is a component of the small-cap benchmark Russell 2000 Index (RUT).
BKSY stock has underperformed considerably in 2024, down about 50% on a YTD basis. However, the volatile shares have bounced back quickly since setting a new record low of $3.86 in late September, with BKSY already up more than 47% from that low point.
BlackSky Swings to Positive Q2 EBITDA
In early August, BlackSky reported its second-quarter results. The company is not yet profitable, and it reported a loss of $0.06 per share - narrower than last year’s $0.24 per share loss, and also better than analysts' estimated loss of $0.09 per share. Revenue for the quarter totaled $24.94 million, up 29% year over year, but just short of Wall Street’s $25.15 million forecast.
During the quarter the company won $40 million in new contracts and renewals, while its imagery and software analytical services revenue grew by 14% YoY. Operating expenses for the quarter were $29.8 million, down slightly from the year-ago quarter, while adjusted EBITDA was $2.1 million, much better than last year’s loss of $5.8 million.
Management reiterated their 2024 outlook, which calls for revenue of $102 million to $118 million, and adjusted EBITDA between $8 million and $16 million.
“BlackSky delivered another strong quarter driven by a 29% year-over-year increase in second-quarter revenue and substantial operating leverage which led to improved margin performance,” said, CEO Brian E. O’Toole.
BKSY ended the quarter with cash and equivalents of $42.3 million, and expects to receive about $28.2 million in payments over the next 12 months to further support its liquidity.
What Do Analysts Expect for BKSY Stock?
Analysts are very bullish on BKSY stock, as indicated by the consensus “Strong Buy” rating among the six in coverage. Most recently, on Oct. 2, Oppenheimer initiated BKSY at “Buy” with a price target of $10.
"BKSY has created the market of global, high-resolution imaging, almost hourly, with unique software/AI to easily capture and analyze the images. To date, no peer has come close to these capabilities at this cost. We see this as a large $80B plus market growing 12%+ per year. Its space data as a service is set to improve with its launch of its first Generation-3 satellites coming this quarter," wrote Oppenheimer in a note accompanying the bullish initiation.
Oppenheimer sees BlackSky’s revenues reaching $500 million in the next seven years, with free cash flow exceeding $100 million.
The brokerage firm's $10 price target is actually the lowest on the Street, and implies expected upside of 76.7%. On average, the 12-month price target for BKSY is $18.50, indicating upside potential of more than 226% from here.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
