Gen-3 Satellite Advancements Will Drive International Expansion And Defense Opportunities

Key Takeaways

• Expansion of satellite and analytics capabilities is driving strong demand, international growth, and premium pricing while reducing reliance on U.S. government contracts.
  
• Investments in new technologies and market segments position BlackSky to capitalize on rising global demand for real-time geospatial intelligence and diversify future revenues.
  
• Heavy reliance on government and international contracts, significant capital investments, and unpredictable revenue streams increase financial risk and pose challenges to long-term stability.

Catalysts

Operates as a space-based intelligence company in North America, the Middle East, the Asia Pacific, and internationally.

• The ramp-up of the Gen-3 satellite constellation, coupled with demonstrated high performance and lower costs, is creating strong demand and contract expansion (especially once general availability launches in Q4) and is likely to drive a step-function increase in recurring imagery and analytics revenues in 2025 and beyond.
  
• There is accelerating adoption of BlackSky's AI-enabled Spectra analytics-customers are integrating these tools into operational workflows (both defense and commercial), enabling BlackSky to charge premium pricing and driving improved gross and net margins over time.
  
• The international customer base is expanding rapidly (85% of funded backlog now international, vs. 40% a year ago), reducing exposure to U.S. government budget volatility and creating long-term revenue visibility through multi-year, recurring contracts.
  
• Broad momentum in global space infrastructure investment and increasing need for real-time environmental, defense, and disaster intelligence is increasing the total addressable market, positioning BlackSky to capture significant out-year revenue growth as satellite capacity and service offerings increase.
  
• The accelerated development of the Arrow Constellation targets a new market segment (large-scale, wide-area mapping and monitoring) and is timed to address a forecasted global supply gap starting in 2027, potentially unlocking a major new revenue stream and diversifying BlackSky's long-term earnings profile.

BlackSky Technology Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming BlackSky Technology's revenue will grow by 30.1% annually over the next 3 years.
• Analysts are not forecasting that BlackSky Technology will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate BlackSky Technology's profit margin will increase from -82.2% to the average US Professional Services industry of 7.1% in 3 years.
• If BlackSky Technology's profit margin were to converge on the industry average, you could expect earnings to reach $16.4 million (and earnings per share of $0.38) by about September 2028, up from $-86.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 79.0x on those 2028 earnings, up from -6.7x today. This future PE is greater than the current PE for the US Professional Services industry at 26.1x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.36%, as per the Simply Wall St company report.

BlackSky Technology Future Earnings Per Share Growth

Risks

• Ongoing U.S. government budget uncertainty and the potential for continuing resolutions could slow or reduce government contract awards, creating revenue volatility and impacting overall revenue and adjusted EBITDA.
  
• Near-term revenue growth is highly dependent on the ramp-up and adoption of Gen-3 satellite services, but many current customer agreements are early access trials without full multi-year commitments, which could delay or reduce anticipated revenue if conversion rates fall short.
  
• Significant investments in the Arrow constellation and recent acquisitions (such as LeoStella) require substantial capital expenditures, which, along with convertible debt issuance and equity raises, may pressure the balance sheet and increase risk of equity dilution, ultimately impacting earnings per share and net margins.
  
• Lumpy, milestone-driven professional and engineering services revenue introduces ongoing unpredictability in quarterly revenues and cash flow, making long-term revenue stability more difficult to achieve.
  
• Although international markets are expanding rapidly (now comprising 85% of backlog), increased reliance on diverse international contracts exposes BlackSky to geopolitical, regulatory, and counterparty risk, which could threaten long-term revenue stability if global conditions change or if demand in key regions falters.

Valuation

• The analysts have a consensus price target of $24.375 for BlackSky Technology based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $31.0, and the most bearish reporting a price target of just $17.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $230.4 million, earnings will come to $16.4 million, and it would be trading on a PE ratio of 79.0x, assuming you use a discount rate of 7.4%.
• Given the current share price of $16.43, the analyst price target of $24.38 is 32.6% higher.
• 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.