Bank of America Upgrades HawkEye 360 to Buy, Citing Attractive Valuation

Bank of America has upgraded shares of radio-frequency intelligence company HawkEye 360 to Buy from Neutral, arguing the stock presents an attractive investment opportunity following a recent selloff across the space and defense sector.

Rating Change and Rationale

In a research note published Thursday, BofA analyst Ronald Epstein lowered the firm's price target on HawkEye 360 to $23 from $34 but emphasized that the new target still offers significant upside from its recent trading levels around $16 per share. The analyst stated that despite the broader market downturn for its peers, HawkEye's "underlying business as strong."

Strong Fundamentals and Growth

Bank of America highlighted several key indicators of the company's robust health. The note pointed to strong operational performance and a solid pipeline for future revenue.

• Second-quarter revenue growth reached 87%.
• The company holds a $292 million backlog, which provides visibility into its financial targets through 2026.
• International demand was a standout, with overseas revenue growing 134% year-over-year to account for 42% of total sales, up from approximately 30% a year prior.

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This international expansion, driven by new sovereign customers including a multi-year contract with India for maritime domain awareness, helps diversify HawkEye's business away from a concentration of U.S. government agencies, the note added.

Future Catalysts

BofA identified future satellite constellation expansion as a key driver for the company. HawkEye is scheduled to launch Clusters 15 and 16 in the second half of the year. Furthermore, the development of lower-cost Block 3 satellites, which are reportedly 75% cheaper than the previous generation, could begin launching by early 2027.

The analyst described a recent slowdown in U.S. revenue as a temporary timing issue related to government budget delays. This was reportedly offset by new contract awards from customers including the National Reconnaissance Office, the U.S. Space Force, and NASA. The bank's revised $23 price target is based on a multiple of 30 times the company's estimated 2027 EV/EBITDA.