Amazon Puts Pressure on SpaceX with Satellite-Based Connectivity Push
Amazon's entry into the satellite-based connectivity market has raised concerns for SpaceX investors. The e-commerce giant is looking to challenge SpaceX in this space, but the rocket company has a significant lead over its competitors.
SpaceX has a massive head start with over 11,000 active satellites in orbit and a $1.6 trillion addressable market for its internet connectivity business. This unit recorded $4.3 billion in revenue in the second quarter, up 66% from the previous year.
Amazon's approach to this market is different from SpaceX's. Instead of building its own rockets, Amazon is contracting launch services from Arianespace and has already launched 100 satellites into orbit. The company plans to start providing internet connectivity this year and has a remaining contracted launches that will significantly expand its constellation.
While Amazon has an advantage in terms of capital expenditure, SpaceX's vertically integrated business model allows for lower marginal costs per launch. The company is also innovating with the development of Starship, a next-gen rocket that could further extend its lead over competitors.
The valuation of SpaceX shares is a concern for investors, trading at 208x forward earnings. Analysts expect the company to become profitable soon, but it may take time for its shares to grow into their current valuation.