Amazon’s Little-Known Venture Wins Big NASA Contract

The U.S. space agency NASA has awarded $67 million to Amazon (AMZN) to support the building of a space communications system. Although Amazon is better-known for its e-commerce and cloud computing businesses, the company also runs a space-focused business under the Kuiper brand. The NASA award went to Amazon’s Kuiper subsidiary.

NASA has awarded a total of $278.5 million to six firms working on satellite communications services. In addition to Kuiper, the other beneficiaries of the NASA award are Elon Musk-led SpaceX, Inmarsat, Viasat, SES, and Telesat.

What Is Kuiper Doing?

The Virginia-based Kuiper is developing a satellite system that will enable it to provide affordable high-speed internet to unserved and underserved regions around the world. It aims to operate a network of more than 3,200 satellites. Kuiper plans to launch its first satellites by Q4 2022. It has agreements with Blue Origin, United Launch Alliance, and Arianespace to help with satellite launches. Blue Origin is a spaceflight startup led by Amazon founder Jeff Bezos.

Kuiper and the other firms backed by NASA in the space communications service program are expected to prove their proposed solutions by 2025.

Wall Street’s Take

On April 20, Cowen & Co. analyst John Blackledge maintained a Buy rating on Amazon stock but lowered the price target to $4,400 from $4,500. Blackledge’s new price target indicates 42.9% upside potential. Although the analyst expects Amazon to deliver strong Q1 2022 results, he sees supply chain and inflationary challenges hurting Q2 results.

The Consensus among analysts is a Strong Buy based on 34 Buys, one Hold, and one Sell. The average Amazon price target stands at $4,112.76 and implies an upside potential of 33.5% to current levels. Shares have declined 10% over the past six months.

Stock Investors

TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Amazon, with 3.4% of portfolios tracked by TipRanks increasing their exposure to AMZN stock over the past 30 days.

Takeaway for Investors

If Kuiper’s space broadband project proves to be a success, it could benefit Amazon in several ways. For example, extending global internet access could help Amazon reach more shoppers for the benefit of its retail business. Moreover, the expanded audience could also boost Amazon’s online advertising business. Additionally, increasing access to broadband could fuel more demand for Amazon’s cloud services.

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