Why Redwire Stock Is Skyrocketing Higher Today
Key Points
Redwire's newest deal shows that it is well on its way to becoming the "picks and shovels" supplier to the space industry.
That said, the company will likely remain incredibly volatile -- especially after it has nearly tripled already this year.
Redwire is an intriguing growth stock, but it needs to continue delivering improved margins.
- 10 stocks we like better than Redwire ›
Shares of multi-domain space and defense company Redwire (NYSE: RDW) are 18% higher as of 11 a.m. ET on Thursday after it was awarded yet another space contract. Redwire announced a contract with Astrobiome Space, a " biotech company pioneering microbiome solutions for regenerative space agriculture." The contract is:
to grow strawberries and test Astrobiome Space's proprietary soil enhancement product inside Redwire's Greenhouse systems on board the International Space Station (ISS). This award marks the inaugural flight for Redwire's trailblazing Greenhouse system--the world's first commercial space greenhouse.
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Astrobiome hopes to use its biostimulants to grow the first-ever wild strawberries in orbit, potentially strengthening life-support systems beyond Earth, or possibly improving agricultural practices back on Earth.
This deal demonstrates Redwire's engineering expertise by integrating custom components into space-ready platforms for its aerospace customers. In that sense, it is much more than growing strawberries in space. Whether it is the company's PIL-BOX (Pharmaceutical In-space Laboratory-Bio-crystal Optimization Xperiment) device, its solar panel arrays, or its thousands of parts and sensors, Redwire is quickly becoming a one-stop shop for the components needed for a space mission.
While I love seeing deals like these for Redwire, investors need to realize that the stock is still very young, volatile, and dilutive to shareholders for now, as it frequently issues shares to acquire complementary businesses. Furthermore, the company's 2025 acquisition of Edge Autonomy pushed the company into the combat-proven uncrewed airborne systems (UAS) niche, weighing heavily on margins recently.
That said, Redwire's first-quarter gross margin improved from 14.7% to 26.6% year over year, and the company grew sales and backlog by 58% and 71%, respectively. Trading at 9 times sales, Redwire isn't likely to be a smooth ride for prospective investors as it tries to become the main "picks and shovels" supplier to the broader space industry. However, if margins keep improving and management proves to be a shrewd capital allocator as they make acquisitions, Redwire could prove to be a powerful growth stock -- but it's very early, and the stock has already nearly tripled year to date.
Should you buy stock in Redwire right now?
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Josh Kohn-Lindquist 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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