The Astra Space (NASDAQ: ASTR) share price has been plummeting as of late. The space launch company had already lost more than 80% of its value since its initial public offering. Nonetheless, recent events and a failed satellite deployment have plunged the Astra Space share price to an all-time low. Therefore, this could be a buying opportunity for me.
A tropical storm
After weeks of delays in getting a launch license from the US Federal Aviation Administration, Astra finally got under way on Sunday to launch its payload of satellites into space. However, despite a successful launch, the rocket’s second engine abruptly shut down. This meant that the satellites failed to reach the desired destination. While the reasons for this are still being investigated, NASA did release a statement, and has paused its next two launches with Astra.
Despite a loss of the first two of six satellites, the TROPICS constellation will still meet its science objectives with the four remaining CubeSats distributed in two orbits. With four satellites, TROPICS will still provide improved time-resolved observations of tropical cyclones compared to traditional observing methods… NASA will lend any expertise needed but would expect to pause the launch effort with Astra while an investigation is being conducted to ensure we move forward when ready.
Source: NASA
Renowned astronomer Scott Manley gave his opinion on why the satellites didn’t reach their destination. He believes that the engine failure led to the rocket’s inability to orient itself toward the designated coordinates. As a result, the rocket overshot its target. Having said that, he isn’t sure what caused the engine to fail either.
‘Cheap’ failure
Amid all the panic, however, I think it’s important to zoom out and assess the economics and business model of Astra. The Alameda-based company offers the cheapest launch price of any of its competitors. At a base launch price of $2.5m, Astra would theoretically need to fail two out of its three launches, before its nearest competitor, Rocket Lab becomes economical. And, Astra transports satellites weighing less than 150kg (Class D), which are much easier to build than other, bigger satellites. This means that for smaller satellites, Astra still remains the straightforward option.
Nevertheless, Astra has plenty on the line. With its share price deep into penny stock territory, Astra needs to prove its worth or risks going under. Another failure would deem its following TROPICS launch redundant, and impact its already tarnished image.
Refuelling is very likely
To make matters worse, Astra isn’t in the best cash position either. With an accelerating cash burn, I am beginning to worry whether the company can survive without having to raise capital. Given its low share price already, dilution isn’t expected to happen. As such, the company is likely to take on debt. This isn’t ideal with interest rates expected to grow over the coming months.
| Quarter | Cash Burn | Cash and Equivalents |
|---|---|---|
| Q3 2021 | $69m | $379m |
| Q4 2021 | $54m | $325m |
| Q1 2022 | $163m | $255m |
So, is Astra Space stock a buy for me then? While many have been exiting their positions lately, it’s important to remember that the space industry is new and challenging. Elon Musk has even said so himself.
SpaceX, for all its success, had its fair share of failures too. It’s easy to forget in gloomy times that Astra is the fastest company to get its rocket to space, and it’s still this same management team that will be addressing this recent setback. Thus, I’ll be waiting for the results of the investigation before buying more. But for now, I’ll be holding onto Astra Space stock.