Amazon’s (AMZN) new space-based Wi-Fi service called “Project Kuiper” poses a threat to Elon Musk’s SpaceX, according to a report from Bank of America Securities (BAC).
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Justin Post, a top five-star rated analyst with a 70% success rate and average return of 23.50%, wrote in a note to clients that “Project Kuiper is taking off.” Post stressed that, by 2030, Amazon is likely to have more than 3,000 satellites offering data services to Amazon Web Service (AWS) clients and others here on planet Earth.
Post noted that Amazon is ramping up Project Kuiper quickly after undertaking its first satellite deployment in this year’s second quarter. Internet service from space via Amazon is expected to begin by year’s end. “Project Kuiper has remained a top management-growth initiative” at Amazon despite the company’s focus on cost controls, wrote Post.
Expensive Launch
The Bank of America Securities analyst estimates that it will cost $23 billion to build out the Project Kuiper satellite system in Earth’s orbit by the end of the decade. He further estimates peak quarterly spending at $1.1 billion in the fourth quarter of 2025.
However, once fully operational, Project Kuiper will provide Amazon with an entirely new communications business that generates $7.2 billion in annual revenue by 2032. That’s based on roughly seven million subscribers paying $80 a month each for high-speed internet.
While Amazon is initially playing catch-up, Post expects Project Kuiper to eventually rival privately held SpaceX, which has launched more than 9,000 satellites into orbit and operates the Starlink space-based Wi-Fi service. Currently, Starlink has about six million subscribers. Post rates AMZN stock a Buy with a price target of $248, which is 12% higher than current levels.
Is AMZN Stock a Buy?
AMZN stock has a consensus Strong Buy rating among 46 Wall Street analysts. That rating is based on 45 Buy and one Hold recommendations assigned in the last three months. The average Amazon price target of $246.60 implies 10.92% upside from current levels.
