Government Space Data Demand Will Drive Long-Term Upside In This Satellite Operator

Catalysts

About Spire Global

Spire Global operates a multipurpose satellite constellation that delivers specialized data and space-based services for weather, aviation, and security customers worldwide.

What are the underlying business or industry changes driving this perspective?

• Accelerating demand from global weather agencies for advanced atmospheric data, including radio occultation and the upcoming Hyperspectral Microwave Sounder, positions Spire to scale data sales and AI enhanced modeling. This supports sustained revenue growth and higher gross margins as the fixed constellation is leveraged more efficiently.
• Rising geopolitical tension and NATO's new commercial space strategy are expanding budgets and contracting pathways for commercial space reconnaissance. Spire, with operational RF detection and geolocation capabilities, has a growing pipeline of high value government contracts that can lift long term revenue visibility and contract profitability.
• Government initiatives such as NOAA's potential ramp to 20,000 radio occultation profiles per day and NASA's anticipated annual data purchase are creating larger, recurring data procurement programs. These can increase Spire's recurring revenue mix and improve earnings stability over multi year horizons.
• Expansion of regional manufacturing and talent hubs across the U.S., Canada, the U.K. and Europe enhances eligibility for sovereign capability programs and offsets supply chain risk. This can drive a higher win rate on large space services and security contracts and support operating margin expansion as scale grows.
• Growth in climate, aviation safety and asset risk analytics is increasing demand for differentiated datasets, such as ADS-B and Aircraft Exposure Analytics. This enables Spire to layer higher value analytics on existing data streams, which can raise average contract values, improve net retention, and support stronger earnings growth.

Assumptions

This narrative explores a more optimistic perspective on Spire Global compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Spire Global's revenue will grow by 6.9% annually over the next 3 years.
• The bullish analysts are not forecasting that Spire Global will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Spire Global's profit margin will increase from 37.6% to the average US Professional Services industry of 7.5% in 3 years.
• If Spire Global's profit margin were to converge on the industry average, you could expect earnings to reach $8.5 million (and earnings per share of $0.22) by about December 2028, down from $35.1 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 95.0x on those 2028 earnings, up from 9.0x today. This future PE is greater than the current PE for the US Professional Services industry at 25.0x.
• The bullish analysts expect the number of shares outstanding to grow by 5.68% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.22%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Heavy reliance on large government and agency programs such as NOAA, NASA, ESA and NATO aligned sovereign capability contracts exposes Spire to budget cycles, policy shifts and procurement delays. These factors could slow contract awards and renewals and constrain revenue growth and visibility in the long term, ultimately pressuring earnings.
• The 12 to 18 month lag before recognizing revenue on major space services contracts, combined with percentage of completion accounting complexities and the ongoing auditor transition, creates sustained timing and execution risk. This could lead to revenue shortfalls, elevated costs and weaker net margins and operating cash flow than investors expect.
• Strategic investments in new technologies like the Hyperspectral Microwave Sounder, expanded manufacturing facilities across multiple regions and selective hiring in sales and defense talent require substantial upfront cash outlays. If commercial uptake is slower than anticipated these initiatives could depress net margins and delay the path to positive earnings and cash generation.
• Intensifying competition in commercial weather, aviation data and RF geolocation from peers such as Tomorrow.io and other RF intelligence providers may limit pricing power on data products and space services. This could increase customer acquisition costs and potentially reduce long term revenue growth, gross margins and overall earnings potential.
• The sale of the maritime business and pivot toward higher value but more concentrated government and space reconnaissance opportunities increases exposure to program specific or geopolitical shocks. Any disruption, cancellation or underperformance of a few key contracts could materially impact recurring revenue stability and lead to more volatile earnings and cash flows.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Spire Global is $17.0, which represents up to two standard deviations above the consensus price target of $15.25. This valuation is based on what can be assumed as the expectations of Spire Global's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $12.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $113.9 million, earnings will come to $8.5 million, and it would be trading on a PE ratio of 95.0x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of $9.63, the analyst price target of $17.0 is 43.4% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.