Spire rides Nvidia’s wave, driving up its stock price

Global Spire NYSE:SPIR emerged as an AI winner during By Nvidia Corporation NASDAQ:NVDA GTC Developer Conference. The conference was a high-impact event, with Nvidia CEO Jenson Huang mentioning numerous critical players in the field of artificial intelligence. New for Spire Global is a collaboration that will strengthen its proprietary platform with the power of artificial intelligence.

Spire Global’s collaboration with Nvidia will accelerate growth

The collaboration aims to integrate Nvidia’s Earth-2 cloud with Spire’s radio occultation data and property assimilation platform to accelerate weather predictions. Earth-2 is an artificial intelligence application that seeks to simulate and visualize Earth’s atmosphere, incorporating information from numerous artificial intelligence models. The result will be weather forecasts that, according to Spire, are not achievable with traditional methods.

The opportunity for Spire is obvious. Artificial intelligence is expected to increase its attractiveness to consumers, businesses and governments and help accelerate its growth. Not only is the global weather forecasting industry expected to grow at a high single-digit CAGR for the foreseeable future, but there is also market share to be captured. In the weather forecasting industry, weather-related business services will grow at double the rate of the broader market, which is a segment where Spire can excel.

Spire Global is a weather company, but its satellites, data assimilation, and AI-powered platform enable much more. Offerings include weather information, Earth and climate data, ship and aircraft tracking, and port/route information.

Spire Global is on track to outperform in 2024 and 2025

Analysts at Spire Global expect a solid year in 2024 and 2025, but they may be underestimating its growth. The forecast does not include the impact of the collaboration with NVIDIA, and growth is expected to start slowing this year. Acceleration of growth should be expected as the business is supported by organic growth, customer penetration and market share gains.

Analyst sentiment for the stock is bullish, but its valuation is questionable. The three analysts tracked by Marketbeat.com rate it a Buy but see it down 10% according to consensus. The caveat is that most goals are several months old, the scope is broad, and revisions are likely. The question is whether analysts believe the partnership with NVIDIA will move the revenue needle enough to justify a share price increase.

There are headwinds for Spire Global’s share price

There are headwinds for Spire Global’s share price, including insiders and institutions. Insiders and institutions have been selling off shares conspicuously and may soon cap gains. Insiders own around 20% of shares and institutions own another 20%, so there is risk for investors beyond dilutive share offerings. The share count is up nearly 20% in 2024, and guidance assumes a further 2.25% dilution this year.

The budget details are less than favorable. The company has adequate liquidity to continue operations to profitability, but numbers are falling, debt is rising, and capital is collapsing. Equity fell more than 35% in 2023 and is unlikely to grow in 2024.

Spire Global’s stock price forecast is bullish with the possibility of resistance

The technical action is favorable, but there are obstacles to overcome. The market shows a rounded bottom on the weekly chart, with the recovery supported by increasing volume. This pattern could lead the market to a complete reversal. The first target for significant resistance is near $26, which is good for a 50% gain from current levels. The risk is that this market does not rise above that level and becomes range bound at $26.

The next visible catalyst for rising stock prices is the earnings report due on April 30th. Potential drivers for the market include performance and guidance, which could be robust. The fundamental aspect will be profitability, expected for the next few quarters.

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