Attempting the impossible (2/27/23)

Good morning. SpaceX scrubbed the Crew-6 launch at ~T-2 due to an ignition fluid issue. The next launch attempt is set for Thursday at 12:34am.

Today’s newsletter:🤔 SpaceX ‘23 revenues📶 Sovereign broadband🗓️ The week ahead

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SpaceX’s ’23 Revenues: A Reformed Wall Street Analyst’s Best Guess

Ed. note: This analysis was authored by Mo Islam, Payload’s cofounder and a former Wall Street analyst. This is an educated best guess, not based on access to any SpaceX internal data.

We’re attempting the impossible yet again.

By that, we mean we’re trying to predict SpaceX’s revenue for this year. We also revised our 2022 projections, which we published back in October, to account for new data. You can find that as well as further detail on all assumptions in the full version of this article. Heed the note above—none of this analysis is based on confidential or proprietary info; it’s simply our best guess.

2023 Projections

Let’s break this down by business lines:

Launch: For 2023, we decided against altering too many 2022 assumptions on the pricing side. We assume 87 launches for 2023, which is less than SpaceX’s 100 launch target.

Starlink: Estimating Starlink subscriber growth a year in advance is a fool’s errand, given the many variables in play.

Other Revenue: We assume SpaceX will continue execution on its existing major contracts outside launch and Starlink, which includes the Human Landing System (HLS) and development of the US Space Force’s (USSF) Transport & Tracking Layer (TTL) satellites.

A word on capacity…

For the time being, we do not believe data capacity is a major concern, considering that at least 1,000 additional Starlink birds will go up this year.

We’ve looked at multiple estimates of Starlink capacity. Models can be based on “cells,” i.e. the geographic area covered by a single node, or a user-based methodology. For the latter, you analyze concurrent streams and oversubscription rates. To give an example: (200 concurrent streams at 100 Mbs per satellite) X (a 5x oversubscription rate) X (4,400 satellites) = 4.4M theoretical user capacity.

Either way, we don’t see capacity being an issue later this year. Even with reports of throttling and price hikes, we expect the additional satellites that will be launched this year to balance current issues.

Conclusion

SpaceX is clearly at a point where its ability to scale revenue is real. To wit:

• SpaceX launched 31 missions in 2021 and 61 in 2022. SpaceX is targeting 100+ this year (though Payload assumes 87 for now).

• Starlink’s scale is currently hamstrung by user terminal production and Gen-2 readiness.

• Gen-2 designs are why Starship is critical. Even without Gen-2, though, Starlink revenue can catch up to that of launch (and become cash-flow positive) this year.

• SpaceX is outperforming on human spaceflight. In this business, SpaceX should continue to increase pricing power over time.

• HLS revenue recognition should start to rapidly increase once Starship is operational. We assume this is a significant milestone payment.

• Finally, Starshield should start to grow into a decent part of the business this year. We do not attribute any revenue to Starshield for now.

Payload’s takeaway

The risk to our projections may be more to the upside than the downside. Given how vocal SpaceX management has been concerning the financial prospects of Starlink, we believe that an IPO scenario is likely over the next 18 to 24 months. SpaceX COO and President Gwynne Shotwell recently stated that Starlink had a “cash flow positive quarter” in 2022 and “will make money” this year.

Ultimately, we recognize predicting SpaceX’s revenue is extremely challenging, given the multitude of variables we’ve laid out here. In fact, we know that even some investors in SpaceX don’t have accurate data around historical financials or projections. That’s just Elon being Elon.

We’ll continue to monitor this and update our internal model. Stay tuned for a year-end revision based on new data that we gather over the course of 2023.

This is an abridged version of analysis that first appeared in Mo's Secret Monthly Newsletter. To gain access to the newsletter and its archives, refer at least one friend to Payload using the customized referral link at the bottom of this newsletter.

And read the full analysis here.

Sovereign Constellations Are Coming

For the past few years, news of Western private constellation buildouts has become commonplace. At various stages of maturity, these constellations are intended to provide broadband across the globe.

Now, though, more nations are drawing up their own plans to bring that broadband capability within the hands of their own governments.

• The US has been designing its Proliferated Warfighter Space Architecture (PWSA, formerly the National Defense Space Architecture), a secure LEO network to support the DoD, for a few years now.

• On Feb. 14, the EU officially approved its IRIS2 (Infrastructure for Resilience, Interconnectivity and Security by Satellite) constellation plans.

• And China is working on plans for its own LEO broadband constellation that could hinder outside attempts to garner market share within the country or its allies.

IRIS2

The EU’s sovereign constellation is intended to bolster Europe’s governmental and institutional communication services through a multi-orbit approach. Europe already operates GEO comms assets, and with IRIS2, it would add ~170 new LEO birds to the fleet between 2025 and 2027, per European Spaceflight.

• That timeline leaves some room for uncertainty. The EU plans to utilize European launchers for the constellation, and does not currently have the sovereign launch capacity to get a constellation of that size to orbit by 2027.

• ESA is planning to select contractors to build the satellites in 2024.

EU’s Parliament has allocated €2.4B ($2.53B) to the project.

China’s LEO plans

China has been working on its own LEO constellation. We still don’t know a lot of the details, but analysts expect that it will contribute to Beijing’s goals of expanding its influence and growing its economy.

Right now, SpaceX’s Starlink and Amazon Kuiper aren’t planning to provide service within China, which is served by terrestrial networks.

Countries that have already purchased Chinese GEO assets, including Belarus, Pakistan, Venezuela, Bolivia, and Laos, “might be more likely to lean towards a Chinese constellation for government projects,” Blaine Curcio, a senior affiliate consultant for Euroconsult, told SpaceNews.

The upshot: Though these sovereign constellations are intended more for government and institutional use, there are still concerns that they could interfere with companies like Starlink, Kuiper, and OneWeb in their efforts to establish a global customer base.

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In Other News

• Russia’s replacement Soyuz spaceship docked with the ISS.

• Starlink’s “V2 mini” satellites are equipped with new argon Hall thrusters developed in-house. The new propulsion systems have 2.4x the thrust and 1.5x the impulse of the previous generation of thrusters.

• Astroscale has closed a Series G round, raising ~$76Mmillion. Investors include Mitsubishi Electric and Yusaku Maezawa.

• China has recruited six new astronauts, according to the deputy chief designer of China’s human spaceflight program (H/T Leonard David).

• Scientists found the meteorite that landed in southern Texas with the force of eight tons of TNT (and weighed the same as approximately four baby elephants).

Payload Insights

In the latest edition of Euroconsult’s capacity pricing trends report, the market research firm finds that fixed-satellite service (FSS) capacity pricing for video and data markets has fallen by 20% and 67%, respectively. And it’s poised to continue dropping: