This Tiny Space Stock Just Bought a $1 Billion Defense Business. Is It a Buy?

Group 1: Company Overview - Redwire is transitioning into a defense stock by acquiring Edge Autonomy, which specializes in autonomous systems and advanced optics for military applications [2][3] - The acquisition aims to diversify Redwire's portfolio by integrating combat-proven autonomous airborne platforms alongside its existing space technology [5][6] Group 2: Acquisition Details - Redwire will purchase Edge Autonomy for a total of $925 million, consisting of $150 million in cash and $775 million in Redwire stock [8] - The company currently has about $43 million in cash and will need to borrow to finance the acquisition, increasing its debt from $138 million to a net debt of $245 million [8][9] Group 3: Financial Projections - The combined business is expected to generate between $535 million and $605 million in sales this year, potentially doubling Redwire's previous revenue of $298 million [10] - Analysts predict that the combined entity will produce positive free cash flow this year, with expectations of reaching $171 million in free cash flow by 2027, indicating significant growth potential [10][12] Group 4: Market Sentiment - Following the acquisition announcement, Redwire's stock experienced a boost, reflecting positive market sentiment towards space and defense stocks [2][10] - Analysts have mixed views on Redwire's valuation, with a current price-to-free cash flow ratio of 54, but potential for this to drop to less than 9x by 2025 if growth projections hold [11][12]