Cost Explosion in Orbit: Amazon's Project Kuiper

In 2019, Amazon announced an ambitious project to rival Elon Musk's Starlink: Project Kuiper. With plans for 3,236 satellites and 92 rocket launches, the endeavor seems almost modest compared to Starlink's 12,000 satellites. However, the issue of costs has raised concerns: initially estimated at around 10 billion dollars, expenses could rapidly increase to as much as 20 billion dollars, according to an analysis by Quilty Space. Amazon is on solid financial footing, with 89 billion dollars in cash and liquid assets, yet the rising costs could still strain the company. Interestingly, the former Starlink head Rajeev Badyal is leading the project, after a prior conflict with Musk. This past could be the source of additional delays and costs. Adding to the challenge is that Amazon does not manage its rocket launch services internally but relies on the market. Collaborations with industry giants like Boeing, Lockheed Martin, and even Blue Origin highlight the external reliance. The placement of Project Kuiper within the company's relatively weak Devices & Services division also raises questions. Even though Amazon is unlikely to turn a profit in the medium term, there are optimistic scenarios: with a hypothetical customer base of 100 million paying users, annual revenues of 36 billion dollars beckon. Yet the path to this goal is still long. Interested investors should take a closer look: the analysts of the Motley Fool Stock Advisor did not include Amazon in their top 10 purchase recommendations. However, other more agile options could deliver significant returns in the coming years.