A new era of global internet connectivity is emerging, with Starlink leading the charge. Starlink aims to bring high-speed, low-latency internet coverage to even the most remote parts of Earth. If you’re considering investing in Starlink, this blog post is tailored for you. In this article, we’ll delve into an overview of Starlink and its business model. We’ll also explore its primary advantages, major risks, and give guidance on how to invest in Starlink stocks.
Starlink and Its Business Model
SpaceX’s Starlink project aims to transform internet connectivity by establishing an extensive low Earth orbit (LEO) satellite network. These satellites will collaborate to deliver high-speed, low-latency internet access.
You might question the need for such a service, given that many urban areas already have established internet providers.
However, in reality, as of November 2021, only 63% of the world’s population has access to the Internet. This coverage is even poorer in rural and remote areas.
Internet providers often struggle to provide coverage in areas with difficult terrains, such as mountains, deserts, or polar regions. This is mainly due to the high costs and low returns associated with laying fiber-optic cables in these regions.
While satellite internet services have been around for a while, they are not suitable for most users. Traditional satellite internet services depend on geostationary satellites situated far from Earth in high orbits. This distance causes lengthy signal transmission times, high latency, and slow internet speeds. Additionally, high-orbit satellites are expensive to launch, further limiting their availability.
Starlink’s strategy includes deploying numerous satellites in low Earth orbit, reducing latency and increasing internet speeds. These LEO satellites move quickly relative to Earth’s surface, allowing them to cover vast areas.
To guarantee continuous coverage, Starlink plans to launch a total of 42,000 satellites. These satellites will form an all-encompassing network capable of providing internet services to every corner of the globe.
Reasons to Invest in Starlink
Untapped Market Potential
A persuasive reason to invest in Starlink is the untapped market potential it embodies. With nearly half of the world’s population lacking internet access, Starlink reaches untapped customers in the digital realm.
By offering reliable, high-speed, and affordable internet service to these areas, Starlink could secure a vast customer base. It can generate significant revenue and foster social and economic development. This expansive market opportunity appeals to investors seeking considerable growth potential.
Another incentive to invest in Starlink is the technological innovation that distinguishes it from existing satellite internet providers. Starlink’s low Earth orbit (LEO) satellites enable faster signal transmission and reduced latency compared to traditional geostationary satellites. This results in enhanced internet speeds and a smoother online experience for users.
Additionally, the sheer quantity of satellites in Starlink’s constellation guarantees consistent global coverage, allowing the service to reach a wider area and provide more dependable connectivity. This groundbreaking approach positions Starlink as a potential game-changer in the satellite internet market. It is definitely an attractive investment for those seeking state-of-the-art technology.
SpaceX, Starlink’s parent company, has spearheaded reusable rocket technology, substantially lowering satellite launch costs. The company further reduces costs by offering rideshare services.
Moreover, SpaceX’s upcoming Starship is expected to reduce costs even further. The Starship will have the capacity to launch 240 Starlink satellites per mission. It will be a fully reusable rocket, much like an airplane. This means the cost per launch will be even lower than the current Falcon 9.
All of these cost-effective approaches make the project more financially feasible.
Having learned all this information, you might feel confident about Starlink’s market prospects. It seems to be the future of low Earth orbit satellite internet. You might already be eager to allocate your funds and buy Starlink IPO. However, before diving in, it’s crucial to carefully consider some of the potential risks Starlink faces.
Risks and Challenges of Starlink
The large-scale low Earth orbit (LEO) satellite internet proposed by Starlink is a new and untested concept. As a result, it remains uncertain whether this technology will function effectively and efficiently. The satellites used in Starlink are still being upgraded, and the tests conducted so far are only in the early stages. This technology’s actual efficiency and cost-effectiveness will become clearer as it is adopted and tested by a larger user base.
Global Market and Regulatory Hurdles
Starlink aims to provide internet services on a global scale. Thus, it must navigate the complex regulatory environments of various countries, each with its own existing internet service providers (ISPs). This presents challenges in terms of administrative costs, time, and feasibility of operating in each country. For example, it is unlikely that Starlink will be permitted in mainland China due to strict regulations.
Competition with Traditional ISPs
Starlink initially targets rural, remote areas and developing countries where traditional ISPs might have limited reach. These districts often have low population density and consumer spending power. Therefore, the profit potential of Starlik still needs time to test.
Besides, to become a major player in the internet market, Starlink must compete with established ISPs in developed countries. However, in developed countries, Starlink’s advantages in the mobile internet sector are limited. Receiving satellite signals requires an antenna that cannot be integrated into smartphones. To enter the mobile internet market, Starlink must invest in terrestrial base stations, which traditional ISPs have already built.
SpaceX, the company behind Starlink, still faces significant financial challenges. The estimated annual launch cost is more than $4 billion. That does not even include other research and development costs.
What’s worse, its annual revenue is only about $2 billion, which is not enough to cover these expenses.
To succeed, Starlink must raise funds. Although it is currently financed through the private market, going public with an IPO is a must-go step for Starlink.
Trefis.com offers an interesting breakdown of Starlink’s valuation, which we can summarize in four main points. First, they predict that by 2025, the global internet user base will reach 5.8 billion as the world population grows past 8 billion and internet access reaches 72% of people.
Secondly, as Starlink expands its coverage, it’s expected to attract 0.1% of new internet users by 2021 and 2.3% by 2025. That means the number of new subscribers could jump from 200,000 in 2021 to a massive 5.6 million by 2025.
By 2025, Starlink’s user base might hit 14.4 million, with a monthly average revenue per user (ARPU) of around $60. This figure aligns with the average broadband ARPU in the U.S., leading to an impressive annual revenue of $10 billion by 2025.
Finally, with a projected revenue of $10.4 billion and a price-to-sales (P/S) multiple of 3x, Starlink could be valued at over $30 billion.
Although this multiple seems fair considering the company’s growth potential, it’s essential to keep in mind the associated costs and risks. You should approach these valuations with a critical eye, as emerging technologies can have widely varying estimates.
But, at least, Starlink plays a pivotal role in Elon Musk’s vision of colonizing Mars. Since Starlink is a key financial source for this ambitious project, it must become a profitable enterprise. With Musk’s impressive history of success, there’s a good chance Starlink will achieve this, indicating a bright future for the company.
How to Buy Starlink Stock Before IPO
If you have ample funds and connections, you might have the opportunity to buy Starlink shares during SpaceX’s equity fundraising rounds. However, these chances are usually limited to large funds like hedge funds and private equity firms, not individual investors. Also, be aware that any acquired equity could face restrictions on resale or liquidity.
Pre-IPO Trading Platforms
Specific platforms like IG, SharesPost, or EquityZen enable accredited investors to trade private company shares. To participate, you’ll need to meet particular income or net worth requirements of different platforms.
Invest in Starlink Partners
As Starlink achieves success, its partners could benefit as well. Thus, investing in Starlink partners presents indirect Starlink investment opportunities.
For instance, consider Shift4 Payments. Shift4 is a payment processing company that has declared a 5-year partnership with Starlink. It has already been publicly listed on the New York Stock Exchange under the symbol FOUR. With a brokerage account like Firstrade, which offers zero-commission trading, you can invest without incurring transaction fees.
You can check our Firstrade review here.
Invest in Tesla
Although SpaceX and Starlink haven’t gone public yet, Elon Musk’s Tesla is publicly traded. When Starlink begins providing services, it’s plausible that Musk will integrate this service into Tesla vehicles. This integration would definitely benefit Tesla.
In the future, Starlink’s stock price might strongly correlate with Tesla’s stock price. By investing in Tesla now, you could potentially capture some of the investment appreciation Starlink may bring in the future.