In a research note to investors on Thursday, Stifel analyst Erik Rasmussen initiated coverage of this small-cap provider of space-based data, analytics, and space services with a Buy rating and a price target of $6, which represents 184% upside to its current stock price. The analyst views Spire Global (SPIR) as one of the best positioned "NewSpace" companies and believes it is "on the cusp of a very large and growing opportunity" for space-based analytics, which is a market that is still in its infancy, but one whose adoption is "rapidly accelerating."
BUY SPIRE GLOBAL: Arguing that the "Spir(e)aling stock" doesn't reflect business fundamentals, Stifel analyst Erik Rasmussen started coverage of Spire Global with a Buy rating and $6 price target, which represents 184% upside to the current stock price. Spire is "one of the best positioned NewSpace companies," argued Rasmussen, who believes they are "on the cusp of a very large and growing opportunity for space-based analytics." The market is still in its infancy, but the spread of adoption is rapidly accelerating, and Spire is well positioned to scale its business and capture additional market share with its expanding solution set and a number of secular tailwinds in key verticals, he contended. Over time, as the company’s subscription-based revenues make up a higher percentage, the analyst believes the stock should re-rate to a multiple similar to his identified SaaS comp group, which is 13.3-times.
With the company stumbling out of the gate and reducing guidance in the first quarter after completing the de-SPAC process, the stock has fallen to depressed levels, Rasmussen noted. The company provided preliminary 2022 guidance which he believes combined with strong execution from the company toward its four growth pillars will set the stage to drive increased investor confidence in the long-term growth profile of the business and lead to multiple expansion in the stock. The midpoint of 2022 revenue guidance is $87.5M, which the analyst believes implies organic growth of 54% year-over-year, a re-acceleration of growth. He attributes this re-acceleration to continued strong performance of the Data Solutions business combined with a re-acceleration of growth within Space Services as delays within customer purchasing and launch begin to ease, especially within the federal vertical. Rasmussen remains "encouraged" in the underlying fundamentals of the company and believes its innovative smallsat multi-purpose constellation, can generate long-term value to investors.
While special purpose acquisition companies in general had weak performance in 2021 and early 2022 including the space SPACs, SPIR has been the worst performing of its vintage, the analyst pointed out, adding that he views this underperformance as "overdone," despite the disappointing results in 2021. Rasmussen believes 2022 execution will reset investor expectations higher and drive multiple expansion.
PRICE ACTION: In Thursday morning trading, shares of Spire Global have dropped about 5%, or 12c, to $2.03.
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