Satellite manufacturer Terran Orbital (LLAP) preannounced its year-end cash balance, disclosing its cash on hand had increased significantly during the fourth quarter. Investors appreciated the update, sending shares of Terran Orbital up more than 22% as of 12:30 p.m. ET Tuesday.
Cash nearly doubled in the quarter
Terran Orbital is part of a new breed of space stocks that have gone public in recent years. The company makes satellites for defense and commercial customers, combining design, manufacture, mission operations, and in-orbit support.
Last year was a tough one for the company, with the shares falling about 85% off of their February highs on disappointing results and questions about one of its key customers. The company sold additional stock back in September to fortify its balance sheet, but questions remained about its long-term financial health.
Tuesday's announcement should put some of those fears to rest, at least temporarily. Terran Orbital said it expects to report more than $70 million in cash and equivalents on the balance sheet as of Dec. 31, compared to $38.7 million at the end of September. Cash got a boost from a milestone payment from Rivada, a privately held communications company that has significant orders in with Terran Orbital. The company said it expects to receive additional milestone payments in 2024.
"We are entering 2024 with a strong financial foundation that we believe will enable us to continue to execute on our strategic and operational objectives," co-founder and CEO Marc Bell said in a statement.
Is Terran Orbital a buy after its encouraging update?
While Terran Orbital's outlook looks better today than it did last week, investors need to understand this remains a high-risk stock.
Rivada is a start-up itself, and as a private company there isn't a lot investors know about its business or how to value its order for Terran satellites. Terran Orbital does have contracts with Lockheed Martin and a growing relationship with the defense titan, providing some downside protection, but investors are still a long way from determining whether Terran Orbital will able to make good on its potential.
If nothing else, the cash update shows that Terran Orbital should have more time to build out its business. That alone should be enough to encourage investors willing to tolerate the risks involved with such a speculative stock.
