Wall Street Turns Sour on Once-Buzzy Space Stock After 73% Rout

Wall Street analysts are rushing to slash their price targets on spacecraft and satellites manufacturer York Space Systems Inc., saying the company’s path forward looks uncertain amid supply chain troubles and a slower pace of government contracts.

At least six analysts, or about half of those covering the firm, slashed their price targets by an average of 54% since Aug. 14, according to data compiled by Bloomberg. Two of them — Canaccord Genuity and JPMorgan Chase & Co. — also downgraded the stock, which now has five buy recommendations, five holds and no sell ratings.

“I think the market is confused and concerned about the growth trajectory for the business now,” said Bloomberg Intelligence analyst George Ferguson. “They are in a low-volume part of the market which makes it difficult to make money, and trying to grow into profitability and any delay in securing more of the higher margin government contracts just pushes that timeline out.”

The latest analyst actions on York followed weak second-quarter results last week, when the company cut its full-year revenue outlook by 32% at the midpoint, citing a shift in the government’s procurement methods. Shares have tumbled 38% in August through Thursday’s close and are down 73% from their January initial public offering.

“We’ve heard several defense contractors emphasize that the pace of awards has remained slow, but the magnitude of the reset York shared this quarter was more than we’ve seen for others,” JPMorgan analyst Seth Seifman wrote in a note to clients on Sunday. The analyst cut his rating to the equivalent of a hold from the equivalent of a buy.

Meanwhile, Canaccord analyst Austin Moeller, who downgraded the stock to hold from buy and lowered the price target to $13.50 from $36, said there’s a “lack of clarity on the current component shortages in the supply chain and timing of resolution, which would be helpful to ascertain delivery schedules.”

York’s main selling point during its IPO focused on its ability to produce low-cost satellites for the Pentagon’s Golden Dome project, a compelling investment idea as the US government is estimated to spend about $175 billion on the proposed missile shield. The company’s IPO attracted demand for about 20 times the available shares and rallied as much as 28% through a late April peak before slumping. Additional pressure from SpaceX’s record June IPO weighed on the stock, which closed at a record low Thursday.

While Wall Street has never been less bullish on the stock, the average analyst price target of about $20 implies about 120% upside for shares in the next twelve months, even with the recent cuts.

Succeeding in York’s initial proposition of making low-cost LEO satellites “requires consistent high-volume production and being a share leader,” JPMorgan’s Seifman noted.

“York may get there,” but the path, “isn’t very clear right now,” he said.

Here are other notable analyst calls and commentary this week:

Bank of Amercia’s Vivek Arya said Nvidia Corp. shares could be trading at a discount of as much as 50%, with investors overstating risks to the artificial intelligence chip leader.
Dominion Energy got a new bull when TD Cowen raised its recommendation on the utilities company to buy from hold on expectations that the NextEra Energy merger will be completed.
Citi raised its recommendation on shares of Bath & Body Words to buy from neutral on positive risk versus reward going forward.
Enovix shares slumped after William Blair downgraded shares to market perform from outperform, citing the resignation of Chief Executive Officer Raj Talluri. Loop Capital also cut its price target on the stock.