Shares of satellite communications specialist Sidus Space (NASDAQ:SIDU) – which operates as a Data as a Service enterprise – jumped higher on Tuesday. Undergirding sentiment was management’s announcement of a buyout of Exo-Space, a provider of an analytics platform that leverages artificial intelligence (AI) and machine learning (ML). Though SIDU stock represents one of the top-trending securities today, it remains a highly risky proposition.
According to the accompanying press release, Sidus’ acquisition of Exo-Space will allow the former entity to leverage the latter’s edge AI software and hardware for space applications. Strategically, the deal solidifies Sidus’ efforts to move into the growing AI space and expand its offerings regarding its Earth and space observation services.
Financially, Sidus acquired Exo-Space’s assets in a combination of cash, stock options and performance bonus incentives. Per the public statement, “Exo-Space brings a current revenue stream of commercial and government contracts extending through 2025, as well as a pipeline of potential clients.” Notably, the deal should have a positive impact on Sidus’ EBITDA.
SIDU Stock Faces a Credibility Test
Naturally, the executives behind SIDU stock took encouragement at the upside potential. “This accretive acquisition expands our talent, technology, and total addressable market,” stated in part Sidus Space founder and CEO Carol Craig. In addition, the deal leverages Exo-Space’s collective experience in AI and ML.
“Observations markets by providing actionable solutions for our customers’ needs as opposed to just raw data. The integration of Exo-Space EdgeAI technology with Sidus’ sensors provides significant value and transformative potential across various domains,” Craig added. While the announcement is promising for SIDU stock, the underlying enterprise still faces a credibility test.
For one thing, Sidus is extremely cheap in a not-so-encouraging way. Priced at around 17 cents per share, SIDU stock is extremely speculative. In addition, the company carries a market capitalization of less than $13 million at the time of writing. That’s very low, even for nano-cap standards.
Plus, the wild volatility presents a natural barrier to all but the most determined gamblers. Despite strong swings recently, SIDU stock is down around 9% in the trailing month. And since the start of the year, it plunged 83%.
Why It Matters
With investment data aggregator Gurufocus warning about deeply negative operating and net margins over the trailing year, a pathway to profitability represents a key challenge for SIDU stock. Further, in the second quarter of this year, Sidus posted revenue of only $1.37 million, down 26% from the year-ago level.
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On the date of publication, Josh Enomoto 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 InvestorPlace.com Publishing Guidelines.
