We have been long AAC Clyde Space for a few months now. Today, Pareto Securities initiated coverage on the name. The 24 page report is quite bullish with price target of 10 SEK, a significant upside from today price of 2.8 SEK
Pareto Research Front Page Summary
(bold emphasis added):
Space coming to Earth
We initiate coverage of AAC Clyde Space, the small satellite spacecraft and service provider, with a Buy recommendation and 12-month target price of SEK 10 per share, supported by unjustifiably low EV/salesratios and our DCF valuation of SEK 20 per share. The emerging space market offers impressive growth opportunities and AAC Clyde Space is in pole position in the nanosatellite market. The urgent need for Earth monitoring to observe climate change and improve weather forecasts, using Space Data as a Service (SDaaS) from nanosatellites, is a powerful market driver. We expect the company to reach SEK 538m in sales in 2024 and positive operating cash flow in 2022.
Race in space
SpaceX, deploying the broadband satellite network Starlink, will be a major driver of growth in the new emerging space market and fuel growth for AAC Clyde Space and other space companies. With a strong foothold in the nanosatellite market, with deliveries to proximately one third of the installed base of 1,000 satellites, we expect AAC Clyde Space to show a sales CAGR of nearly 50% in our forecast period of 2020 to 2025.
The combination of being a not so well-known microcap stock, strong sales growth backed by a large order backlog and prospects for positive operating cashflow in 2022 all point to a strong investment case for AAC
Clyde Space. From a sentiment point of view, the space sector is set to attract increasing interest in the coming years, with the IPO of SpaceX or Starlink as a main event. Our target price of SEK 10 per share, upside potential of 3x from the current level,should be ignited by sales growth in coming quarters and the de-risking of our 2022-2023 estimates.
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