On Thursday, Spire (NYSE:SR) Global (NYSE:SPIR) shares received an upgrade from a Craig-Hallum analyst, who shifted the stock's rating from Hold to Buy and significantly increased the price target to $20.00, a substantial jump from the previous target of $8.00. The analyst's decision follows Spire Global's recent announcement of a $241 million deal to sell a business unit that accounts for 35% of its revenue.
The analyst highlighted Spire Global's market capitalization, which closed at $293 million, and an enterprise value (EV) of approximately $367 million. The sale of the Maritime business was noted as a significant positive development, not only for the transaction's value but also for the anticipated reduction in debt and strategic shift towards higher growth segments.
Spire Global's remaining business, which is expected to generate around $88 million in revenue and is growing at a rate of approximately 20%, is projected to achieve $27 million in EBITDA by 2026. The analyst underscored that the implied enterprise value after the sale, at 4.7 times the estimated 2026 EBITDA or 1.4 times the 2025 revenue, suggests the company is undervalued.
The upgrade is supported by Spire Global's third-quarter bookings, which reported $40 million in annual contract value (ACV), and its cash balances, which provide a glimpse into the company's financial progress and free cash flow (FCF) goals.
Despite the pending financial restatement and the finalization of the divestiture, the analyst believes that the company's current outlook justifies the improved rating and price target.
The analyst's statement clarified that while they are not updating historical or forward estimates to reflect the pending restatement or the divestiture, they have roughly scoped them to aid in valuation understanding. Full updates will be provided once there is more clarity on the restatement and/or the closure of the divestiture.
In other recent news, Spire Global has reached an agreement to sell its maritime business to Kpler for approximately $241 million, planning to use the proceeds to invest in the expansion of its data analytics and radio frequency geolocation solutions.
The transaction is expected to close by the first quarter of 2025. In partnership with OroraTech, Spire Global is developing a space-based wildfire detection system, aiming to enhance monitoring and response capabilities.
The company reported a 6% increase in revenue for the first quarter of 2024, reaching $25.7 million, with second quarter projections between $29 million and $33 million. However, the company has also announced a restatement of its financial statements for fiscal years 2022 and 2023, and the first quarter of 2024, expected to impact $10 million to $15 million in annual revenue.
Analyst firms Stifel and Raymond (NS:RYMD) James have maintained their Buy rating and downgraded the company, respectively. Canaccord Genuity has resumed coverage with a Buy rating, expressing confidence in Spire Global.
In addition, the company has secured a contract from the National Oceanic and Atmospheric Administration valued at $3,832,500 for supplying radio occultation data for weather forecasting and climate research. These are the recent developments for Spire Global.
InvestingPro Insights
Recent data from InvestingPro adds depth to the analyst's optimistic outlook on Spire Global (NYSE:SPIR). The company's market capitalization stands at $327.07 million, aligning closely with the analyst's cited figure. Spire's impressive revenue growth of 24.15% over the last twelve months supports the analyst's projection of continued growth in the remaining business segments.
InvestingPro Tips highlight Spire's "impressive gross profit margins," which is reflected in the data showing a gross profit margin of 58.39% for the last twelve months. This robust margin could contribute to the company's ability to achieve the projected $27 million in EBITDA by 2026, as mentioned in the analyst report.
The stock's recent performance has been noteworthy, with InvestingPro data showing a significant 43.24% return over the last month and a substantial 175.61% return over the past year. These figures align with the analyst's upgraded outlook and increased price target.
It's worth noting that InvestingPro offers 13 additional tips for Spire Global, providing investors with a more comprehensive analysis of the company's financial health and market position.
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