BlackSky Technology Inc. (BKSY): A Bull Case Theory

We came across a bullish thesis on BlackSky Technology Inc. (BKSY) on Twitter by KevinLMak. In this article, we will summarize the bulls’ thesis on BKSY. BlackSky Technology Inc. (BKSY)’s share was trading at $10.37 as of Dec 23rd.

A satellite array in Earth’s orbit, showing the vast scope of the company’s space-based solutions.

BlackSky is a leading Earth Observation (EO) satellite company that emerged from the 2021 SPAC boom, a period characterized by aggressive valuations and investor enthusiasm. While many SPAC-era companies faced steep declines due to overvaluation or questionable business models, BlackSky stands out as a potential gem amidst the rubble, having lost nearly 90% of its value since its debut but retaining compelling investment fundamentals. The company operates 14 “Gen2” satellites in Low Earth Orbit, offering unparalleled imaging capabilities with up to 14 revisits daily over key latitudes, covering 90% of global economic activity. BlackSky complements its high-frequency imagery with an analytics layer that transforms raw data into actionable insights, creating high-value solutions for governments and corporations.

The demand for high-resolution satellite imagery is expected to grow, driven by geopolitical tensions, increasing defense budgets, and the broader adoption of technology-enabled intelligence. BlackSky’s unique positioning, bolstered by its strong relationship with the U.S. government, ensures a steady stream of contracts and opportunities for expansion. Additionally, advancements in artificial intelligence could amplify the utility of BlackSky’s data, enabling both in-house and third-party applications to extract greater value from its imagery. With operational leverage built into its model, every additional dollar of revenue significantly enhances profitability, as evidenced by a tripling of revenue from $35M to $107M while maintaining flat cost structures.

Financially, BlackSky operates at breakeven on an operational level at current revenue levels of $110M, with plans to achieve full capital expenditure coverage at $150M and generate meaningful profits at $200M and beyond. This trajectory underscores the company’s ability to sustain its business without external funding while preparing for transformative growth through its Gen3 satellite rollout. The Gen3 constellation, set to begin deployment in late 2024, will offer 35cm resolution—placing BlackSky on par with competitors like Maxar and enabling a step-change in revenue potential. With six Gen3 satellites expected by 2025 and the full fleet operational by 2026, significant revenue contributions could materialize in the latter half of 2025.

BlackSky’s fully funded Gen3 expansion and its scalable business model position it for rapid growth in a burgeoning industry. Potential revenue surges, supported by robust government and commercial demand, could lead to a substantial valuation uplift, with revenues potentially exceeding $200M in the near term. The introduction of Gen3 satellites represents a turning point, offering investors exposure to an uncapped growth opportunity in an industry poised for long-term expansion.

BlackSky Technology Inc. (BKSY) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held BKSY at the end of the third quarter which was 6 in the previous quarter. While we acknowledge the risk and potential of BKSY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BKSY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.