BKSY Stock Surges 50% in 6 Months: Here's How to Play It Now

BlackSky Technology Inc. BKSY stock has performed impressively over the past six months. The stock has gained 49.8%, outperforming the industry's 45.3% rally and the 7.6% rise of the Zacks S&P 500 composite.Six Months' Price Performance Image Source: Zacks Investment Research BKSY’s performance has fallen short of its industry peers, AppLovin Corporation APP and Agora, Inc. API rallies of 253.4% and 186.3% for the same period, respectively.As of the last trading session, the stock closed at $13.2, 66.1% lower than the 52-week high of $21.9.The stock’s six-month rally can entice investors to either add it to their portfolio or sell the position. Let us evaluate and find out which card investors should play.Government Reforms Can Affect BlackSky TechnologyCut back on U.S. government spending stands as the greatest risk for BlackSky Technology. Post the recent election, there has been a massive effort to boost the efficiency of the federal government, reduce spending and eliminate waste wherever required.The Pentagon has recently proposed cutting 8% of its budget in each of the next five years, amounting to nearly $50 billion each year. It has prioritized 17 areas, from drones and submarines to military assistance. A narrower budget for the Department of Defense (DoD) is certainly a jab at certain contracts, including BKSY in the Pentagon’s massive emerging technology contracts portfolio. The contracts can be viewed as partially redundant and not be expanded or renewed. Loss in contracts will pose a threat to the company’s growth trajectory.High Competition Can Hurt BKSY’s ProfitabilityBlackSky Technology operates in the satellite imagery market, which has historically been dominated by a few companies leveraging large and costly satellites in geosynchronous orbit. Reduction in launch costs, along with improved capabilities of small-size satellites, has opened the market to new entrants in recent years, changing the optics to competition. Factors including resolution, spectrum and latency have driven image pricing.Competition in these areas is anticipated to increase over time, facilitated by Planet Labs in the process of introducing hyperspectral and high-resolution satellites. Also, competition is set to rise across resolution, spectrum and latency, as inter-satellite linking and vendors introducing onboard processing become more common.To keep up with the competition, BKSY might increase capital expenditure, which has already been increased in the past few quarters, deteriorating its free cash flow position. Therefore, the necessity to invest in technology and talent to stay ahead in the game increases the difficulty in balancing growth and profitability.Blacksky Technology’s Bleak Capital ReturnsReturn on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. BlackSky Technology’s trailing 12-month ROE is negative 49.9% compared with the industry’s average of 6.2%. Image Source: Zacks Investment Research BKSY has also shown negative returns on invested capital (ROIC), with a trailing 12-month ROIC of negative 16.4% against the marginal return of the industry. Image Source: Zacks Investment Research BKSY’s Bottom-Line Prospects Look WeakThe Zacks Consensus Estimate for the company’s 2025 loss is pegged at $2.28 million per share, whereas it incurred a loss of $3.92 a year ago. The recovery might seem positive. However, it does not offset the expected continued losses and should not be mistaken for an indicator of strong financial health. The trend is likely to continue in 2026 as the consensus estimate for loss is pegged at $1.16.Sell BlackSky Technology NowGovernment reform risks are troubling BKSY as the recent proposed cut in the DoD budget is anticipated to hurt the company in terms of loss in contracts. Competition in the satellite imagery market is fierce, and to stay on top of the game, the company must widen its technology investments.However, this attempt could drive a wedge between BKSY’s growth and profitability. Capital returns look discouraging and the bottom-line outlook does not seem healthy.  We recommend potential investors to refrain from investing in BlackSky Technology for now. However, investors who have already borne the fruits of the past six months’ rally in the stock price should sell it and book their profits now.BKSY currently has a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Agora, Inc. Sponsored ADR (API): Free Stock Analysis Report AppLovin Corporation (APP): Free Stock Analysis Report BlackSky Technology Inc. (BKSY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks