Why Did BlackSky Stock Drop Today?
Key Points
BlackSky announced a $30 million defense contract today.
BlackSky didn't say who the customer is, or how long the contract will last.
BlackSky stock costs more than usual for an unprofitable space stock.
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BlackSky Technology (NYSE: BKSY), which operates a constellation of Earth observation satellites (i.e., spy satellites) in orbit, tumbled 2.6% through 10:15 a.m. ET Tuesday.
Crazily, though, the only news about BlackSky stock today is good news.
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BlackSky bags a defense contract
As BlackSky just announced, it has won a "more than $30 million multi-year contract to integrate Gen-3 high-cadence tactical ISR services into a strategic international defense customer's secure environment."
BlackSky did not specify precisely how many years "multi" means, making it difficult for investors to figure out precisely how much this contract will add to BlackSky's annual revenue stream. Mysteriously, BlackSky also called the contact an "expanded solution" -- which appears to imply that this is not necessarily a new customer, nor a new contract, but perhaps only an extension of an existing contract.
And that may mean the contract doesn't actually add anything to BlackSky's existing annual revenues at all.
Is BlackSky stock a buy?
Is that a good reason to sell BlackSky stock, though? Not necessarily. Even inking a contract to extend an existing relationship, and secure $30 million in future revenue, is itself an obvious good thing.
A better reason to sell BlackSky stock, though, might be its valuation.
Priced at $710 million, BlackSky stock isn't one of the more egregiously overpriced space stocks out there on the market today. Still, at a price-to-sales valuation of 6.8, it does cost more than the 4x sales valuation that investors have historically usually paid for unprofitable space stocks. And BlackSky is unprofitable: It's losing $86 million per year at last report. Analysts polled by S&P Global Market Intelligence think it will be 2027 before BlackSky finally earns its first profit.
For me, the price isn't yet right to buy BlackSky.
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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.
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