Amazon’s Investment Into Rockets Is a $100 Billion Opportunity

AMZN stock - Amazon’s Investment Into Rockets Is a $100 Billion Opportunity

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Amazon (NASDAQ:AMZN) today announced signing of three block buster deals for its Project Kuiper, in the commercial rocket space. The agreement entails purchase of rockets from three companies to launch a network of 3,236 internet satellites in the lower orbit of earth. This will provide high speed internet to every place in the world. Management aims to invest $10 billion in the project. AMZN stock is bound to takeoff further from this forward thinking investment.

Specifically, Project Kuiper is designed to cater to areas where there’s limited accessibility to broadband services or have an unreliable source of internet network. The three purchase agreements include:

  • 38 launches with United Launch Alliance (ULA)
  • 18 launches with Arianespace, a European company
  • 12 launches (with a potential for additional 15 launches) with Blue Origin, owned by Amazon founder Jeff Bezos

In the satellite internet network space, Amazon will face competition from Elon Musk’s SpaceX Project Starlink, which has already launched 2,000 satellites so far, serving about 250,000 subscribers.

Amazon’s plan is to garner share in the space through its wider global reach, broad network and infrastructure.

Although the terms of the agreement were not disclosed, management expects to release two Kuiper prototype satellites by late fiscal year 2022 for testing. Also, based Federal Communications Commission (FCC) requirement, AMZN must deploy half of its planned satellites (or around 1,600 satellites) within six years by July 2026.

The company did not disclose any cost details for the project. However, based on the rockets that’ll be used for each Kuiper launch, it should cost between $68 million and $112 million per launch. In total, the project costs are considerable and so are the benefits.

According to Morgan Stanley (NYSE:MS) analyst Adam Jonas, the space economy is expected grow to more than $1 trillion by 2040 with the rising usage of wireless data. As global internet connectivity improves, a higher number of populations will adopt e-commerce, which should significantly benefit AMZN stock.

While highlighting network’s potential, Jonas said Project Kuiper represents as much as a “$100 billion opportunity.”

Turning to Wall Street, 34 out of 35 analysts have recommended to buy AMZN stock with an average price target of $4,143.76, reflecting an upside potential of 26% from the current market price.

On the date of publication, Sakshi Agarwalla did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Sakshi Agarwalla has more than eight years of experience writing equity research reports and preparing financial models for companies across various industries, as well as writing newsletters and financial articles. Recently, she assisted her Fund manager in executing trades, preparing weekly, monthly NAVs and writing newsletters. She has a postgraduate degree in finance and has completed CFA.

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