Redwire wins “Buy” rating at Roth MKM

Space infrastructure provider Redwire (Redwire Stock Quote, Chart, News, Analysts, Financials NYSE:RDW) is a buy right now, says Roth MKM analyst Suji Desilva.

In a research report to clients September 13, Desilva initiated coverage of Redwire with a “Buy” rating and 12-month price target of $10.00.

The analyst says RDW, which went public through a merger with Genesis Park Acquisition Corp in 2021, has clear momentum.

We believe RDW’s program contract-based revenue model provides strong visibility and predictability for investors,” Desilva argued. “We estimate that RDW today has hundreds of millions of dollars in contracted backlog and several billions worth of pipeline revenue opportunity. With organic growth over the last few quarters and two straight quarters of EBITDA profitability under its belt, we believe RDW is poised to drive steady growth and has manageable near-term working capital needs. We believe RDW can fund near-term working capital needs with cash on hand and incremental capital available through a committed equity facility. Our $10 price target represents a CY24 EV/sales multiple of 2.5x, a discount versus its overall technology peers’ CY24 average of ~3x, reflecting RDW’s early-stage growth opportunity. Key investment risks to RDW’s share appreciation include: 1) pace of growth in the emerging space economy market; 2) concentrated revenue dependence on a handful of key customers; 3) dependence on partner launch manifest schedule for key programs; and 4) ability to integrate several recently merged assets.

Desilva thinks RDW will post EBITDA of $3.9-million on revenue of $240.0-million in fiscal 2023. He expects those numbers will be $2.3-million in EBITDA on a topline of $283.0-million in fiscal 2024.

Founded in 2020, Jacksonville-based Redwire was created through the merger of Adcole Space and Deep Space Systems.

The analyst says that while Redwire doesn’t have the sizzle of SpaceX, it stands to benefit from its profile.

“RDW targets the large and growing multi-hundred-billion-dollar global space economy. While RDW itself does not participate in the launch services market segment, we expect the company to nonetheless benefit from steady reductions in launch cost enabled by launch service providers such as SpaceX, Rocket Labs (RKLB-Buy), and others. Driven by frequent and reliable space launches supporting increasing payload capacities and varieties, we expect government (i.e. civil, national security) and commercial customers to implement increasingly larger scope and scale space-related programs. Through a series of acquisitions, we believe that RDW has built a robust portfolio of products and services that can support space infrastructure buildouts for the next several decades to come. RDW offers a comprehensive portfolio of key “building blocks” in support of space missions as well as work/exploration in space, such as space structures, payloads, navigation, communications, power, and system software. Specifically, we expect RDW’s product offerings to support development, construction, deployment, insertion, and maintenance of key reusable space infrastructure assets.