Astra Space (NASDAQ:ASTR), the newly public space launch company after its recent SPAC (special purpose acquisition company) merger, is set to take off with its first rocket launch. That is set to occur in a 16-day window starting Aug. 27. ASTR stock will likely get a nice boost from the event, which could force analysts to begin focusing on its revenue and earnings potential.
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So far the stock has been treading water since it closed its SPAC merger. In fact, it is actually trading below $10.00, as of Aug. 17 ($9.86), which was was the original SPAC IPO price.
What’s Next For Astra
In effect, Astra will start earning its first serious space launch revenue with this launch. The company recently released its Q2 financials on Aug. 12, showing no revenue and $31.3 million in net losses. Moreover, the cash burn rate was about the same at $29.45 million, according to the cash flow statement. This statement showed the same level of negative free cash flow (FCF).
Therefore, it’s a good thing that Astra Space has over $452 million in cash on its balance sheet. The funds came as a result of the SPAC merger and a PIPE capital raise (private investment in public equity) funded by Blackrock (NYSE:BLK), a large money manager.
In effect, the cash provides a long runway for cash burn, which should last it awhile.
However, revenue growth should start rolling in soon. For example, in the earnings release, Astra Space said it had now signed a multi-launch deal with Planet Labs (NYSE:DMYQ) as a newly public satellite customer. In addition, it signed a second contract with NASA as well as a contract with Spire Global (NYSE:SR) which also just went public on the NYSE.
In fact, the one analyst that covers the stock at Deutsche Bank believes the company will produce $3 million in revenue this year and $59 million by next year. Moreover, revenue really begins to spike after that. According to the analyst’s forecast, it will reach $185 million by 2023 and $445 million in 2024. Of course, these are just forecasts, but if they come true, ASTR stock is very cheap right now.
What ASTR Stock Is Worth
As of Aug. 17, Astra’s market capitalization was $2.535 billion, according to Yahoo! Finance, which has often had the most accurate valuation. This puts it at just 5.7 times 2024 forecast sales.
However, after discounting the forecast revenue at 10% annually for 3.5 years, the present value of the 2024 revenue of $445 million is $318.8 million (This is calculated using a complicated formula to reprice future revenue using a discount factor related to accruing 12% per year.) That puts its discounted price-to-sales (P/S) multiple at 8.0 times (i.e., $2,535 million/$318.8 million).
Next, we estimate that a more appropriate valuation for ASTR stock is 10 times sales. This results in a market value of $3.188 billion (i.e., $318.8 million x 10). That implies that at today’s price ASTR stock is worth 25.76% more than today’s price (i.e., $3.188 billion / $2.535 billion -1 = 25.76%).
As a result, look for ASTR stock to rise 26% to $12.40 (i.e., $9.86 price today x 25.76%). This is also close to the Deutsche Bank target price of $13.00 per share.
What to Do With ASTR Stock
Investors should be excited now that there are a number of rocket and satellite companies that have gone public. In fact, just recently an innovative satellite-as-a-service company, Momentus Inc (NASDAQ:MNTS) also went public via a SPAC merger that just closed. That makes four space launch/satellite companies that have gone public and raised capital in the last several months.
Clearly, this is a new public industry that can deliver good results. That will become apparent as the space launch and satellite businesses keep growing.
But one thing investors can do now is begin to accumulate shares in Astra Space as it’s 26% too cheap. As more analysts discover the growth forecasts for the stock and the industry, they will write reports. That could act as a catalyst for the stock.
On the date of publication, Mark R. Hake did not hold any position in any of the securities mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.