Bank of America analysts suggest that Amazon (AMZN, Financial) is unlikely to reap significant returns from its satellite network initiative, Project Kuiper, for several years. However, the project has the potential to spark investor interest in its long-term prospects. Project Kuiper aims to deliver broadband internet services through a network of over 3,000 satellites in low Earth orbit. Amazon plans to launch its first batch of satellites by the end of 2024, with commercial services expected to follow the subsequent year.
Analyst Justin Post highlighted that 2.6 billion people worldwide lack broadband access, with global broadband revenue potential expected to exceed $26 billion by 2032. The business synergies could be considerable if Amazon's logistics network, including autonomous vehicles, trucks, drones, and delivery robots, taps into this always-on internet connectivity. Amazon's enterprise and government clients may also find use cases for the satellite service.
Despite these opportunities, Post noted that the project is likely to incur increased losses in the near term. Considering Amazon's market cap of over $1.8 trillion, any expansion in market value related to Project Kuiper might not materialize for several years. In the short term, discretionary income among populations without internet access remains limited.
The satellite network service also faces established competition from Starlink and will continue to require substantial upfront investments and high recurring costs. Analysts estimate that the service will need seven million users to break even with annual supplemental costs.
