BofA Securities Analyst Downgrades Astra, Citing Botched Rocket Launch And Probe Of Leadership

Bank of America Securities downgraded Astra Space Inc ASTR to Underperform and lowered its price target from $7 to $4 based on the company’s repeated problems with rocket launches and an ongoing criminal investigation of two executives.

What Happened: On Feb. 10, the company’s 43-foot-tall Launch Vehicle 0008 (LV0008) took off on the ELaNa 41 mission from the Cape Canaveral Space Force Station in Florida with four satellites destined for orbit. But three minutes into the flight, a problem occurred after the rocket’s first and second stages separated, which resulted in the rocket going off its trajectory.

“Trading on the name was halted twice after the occurrence, with shares closing the day down over 26%,” wrote Ronald J. Epstein, research analyst with Bank of America Securities, who noted this was the seventh time since July 2020 that an Astra rocket suffered a mishap during a launch into space.

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What Else Happened: Epstein’s analyst note also highlighted the company’s announcement through an 8-K filing that CEO Chris Kemp and CFO Kelyn Brannon were the subjects of a probe by the U.S. District Court for the Eastern District of New York for alleged securities law violations.

“Astra believes the claims are baseless and intends to defend against the suit,” Epstein continued. “We see an active lawsuit against management as yet another risk factor that could spell trouble for the company.”

The Resulting Decision: In view of the botched rocket launch and the investigation of Astra management, Epstein stated the downgrading of status and price objective reflected the “increased risks” associated with the company.

Astra began trading last July, but Epstein wondered aloud if the company went public too soon.

“We believe ASTR’s overall fast approach to market has exposed some glaring issues in development that management must address before a stable launch cadence can be achieved,” he opined, pointing out that while “current market conditions for launch services have created a new ‘race for space’ … proper procedure early on in development will help translate into successful launch cadence and less troubles down the road.”

Photo: Astra