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Daily Intelligence Briefing

Thursday, June 9, 2022

Identifying Change-Driven Investment Themes

Please note that we are SUSPENDING our LONG Agricultural Commodities theme
See the Active Thematic Ideas Section below for details


I. Today’s Thematic Investment Idea

A deep dive into a market driver with alpha generating potential.

The Daily Intelligence Briefing is published by McAlinden Research Partners. The report is provided to Hedge Connection blog readers once per week for free. Below is just one of the five sections that delivers Change-Driven Investment Themes everyday.

Satellite Imagery Firms Secure Long-Term Federal Funding Amid Bolstering of Use Cases in Ukraine

Summary: Nearly two months ago, MRP highlighted rising demand for commercial satellite imagery and associated data from three key firms in the industry. At the end of May, all three of the firms we highlighted, Maxar, BlackSky, and Planet Labs, were recipients of billions of dollars’ worth of new federal contracts spread out over the next decade.

The conflict in Ukraine has served as an “internet moment” for geospatial intelligence that can be utilized inside and outside of wartime by media and government agencies alike, providing a much-improved ability to visualize and map out training grounds, armored vehicles, and troop movements. BlackSky saw revenue nearly double in the first quarter of this year while Maxar cut its net loss by 92%.

Related ETF & Stocks: SPDR S&P Aerospace & Defense ETF (XAR), Maxar Technologies Inc. (MAXR), BlackSky Technology Inc. (BKSY), Planet Labs PBC (PL)

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On April 26, MRP highlighted the key role satellite imagery is playing in the US’s monitoring of Russia’s attack on Ukraine. Government agencies and media sources alike have been bombarding satellite companies for photographs, 3D mapping, and other data, prompting the firms to expedite the expansion of their constellations. This was referred to as geospatial intelligence’s “internet moment” by Bill Rozier, the vice president of marketing at publicly traded satellite imagery provider BlackSky.

Just about a month later, on May 25, the US National Reconnaissance Office (NRO) announced they’d be funding three firms with billions of dollars in defense contracts throughout the next decade as part of its Electro-Optical Commercial Layer (EOCL) program. Each of those chosen firms, Maxar Technologies Inc., BlackSky Technology Inc., and Planet Labs, were direct focuses of our April intelligence briefing on this budding industry.

Maxar, in a securities filing, said its 10-year EOCL contract is worth up to $3.24 billion, with a five-year base contract of $1.5 billion and optional contracts worth up to $1.74 billion. BlackSky’s contract is valued at up to $1.02 billion over 10 years. Planet was more secretive about the value of its deal with the NRO since it is currently in a quiet period in its lead up to their quarterly earnings call. More details should be available on June 14 when they report.

As TechCrunch writes, commercial imaging capabilities in orbit have likely outstripped many assets put in place over the last few decades by the NRO. It’s not particularly feasible to launch a new, “secret” constellation that provides the level of coverage those providers do, so they’re just going to pay for the kind of high-level access the companies always knew would be valuable.

Use Cases Demonstrated in Ukraine

Uses for satellite monitoring have been plentiful throughout the last year, even long before the formal invasion of Ukraine began. 
As far back as June of 2021, when MRP first began covering Russia’s buildup of their troops in the southwest of the country near the border of Ukraine, satellite images were instrumental in helping the government agencies and media outlets observe Russian training sites, armored vehicles, and other military footprints. By the end of the year, Maxar had already locked up more than $100 million in new defense and intelligence contracts.

Just before Russian troops begun their invasion of Ukraine, The Wall Street Journal notes satellites were detailing the Kremlin’s plans. When Mr. Putin said his troops massing at the border were pulling back, satellites showed the opposite, and that Russia had built a bridge from Belarus for tanks to cross a river into Ukraine. Planet Labs was able to spot the bridge because its fleet of roughly 200 satellites scan all of Ukraine once a day, Planet co-founder and Chief Executive Will Marshall told the Journal.

Space News has reported the NRO and the National Geospatial Intelligence Agency more than doubled their purchases of commercial electro-optical imagery over Ukraine since the conflict started. Since the start of the year, Axios reports Maxar has been cited by the media more than 54,000 times. Much of this data is also being made available to Ukraine to aid their military operations.

As we highlighted in April, satellite imagery has also been used to ascertain more a more accurate number of military and civilian casualties. For example, Maxar’s satellite photographs helped confirm ground-level footage showing bodies in the streets of Bucha, a suburb of Kiev, as well as grave trenches and other evidence in the city that may be indicative of what US President Joe Biden has referred to as “war crimes”. As WIRED Magazine writes, a new government-funded Conflict Observatory, partnered with Yale University’s Humanitarian Research Lab, the Smithsonian Cultural Rescue Initiative, and several other private firms will use open-source investigation techniques and satellite imagery from the National Geospatial-Intelligence Agency’s commercial contracts with private companies to continue collecting evidence of possible war crimes.

Earnings and Valuations

Though revenue is booming and profitability improving for satellite imagery firms, valuations in the sector have been deteriorating for some time. The aforementioned NRO contracts provided a quick boost to share prices, but most remain well-off of previous highs reached in autumn 2021.

Per CNBC, Maxar reported $405 million in first quarter revenue for 2022, up slightly from a year prior, with an adjusted EBITDA profit of $84 million, a 25% increase. Maxar’s order backlog fell 14% from the fourth quarter to $1.6 billion. On a per-share basis, Seeking Alpha notes the Westminster, Colorado-based company posted a per share loss of -$0.10, but net loss was trimmed to -$7 million from -$84 million a year ago. Maxar has been the best performing stock in this industry, mostly keeping pace with the S&P 500 over the last 8 months.

BlackSky reported record revenue of $13.9 million in the first quarter, up a whopping 91% from the prior year period. Adjusted EBITDA showed a loss of -$9.5 million, a 53% improvement YoY. BlackSky’s full year 2022 guidance projects revenue between $58 million and $62 million – but Via Satellite notes that is down significantly from when the company first announced plans to go public in February 2021 and projected $114 million in revenue for 2022. Since BlackSky completed its SPAC merger with Osprey Technology Acquisition Corp. on September 9, 2021, the stock has plummeted roughly 80%.

As we mentioned earlier, Planet Labs will post their latest quarterly results next week.


As Research and Markets reports, the global satellite data service market is estimated to be worth $13.7 billion in 2022. It is expected to reach $35.9 billion by 2027, growing at a CAGR of 21.2%.

In the same way that US spending on missiles, aircraft, and other technologies will be critical in modern warfare, the militarization of space will also require significant funding. As part of defense spending proposals for 2023, the US Space Force’s budget request of $24.5 billion represents a more than 40% increase over the previous year’s spending.

A major focus of the Department of Defense’s policy in space will be satellite data and imagery, as evidenced by the significant demand for those products in 2022. While the war in Ukraine may only be a temporary state of affairs, monitoring Russian aggression, as well as China’s moves in the Pacific and other areas, will remain a critical component of the US’s defensive capabilities. 

MRP added Long Aerospace & Defense to our list of themes on June 18, 2021 and, in light of the war in Ukraine, we are re-affirming this theme today. Since the initiation of this theme, the SPDR S&P Aerospace & Defense ETF (XAR) has fallen -15%, thus far underperforming an S&P 500 decline of -1%.


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