Really interesting find. You gotta love almost everything about the company - serious mngmt with skin in the game, cash runway, preservation of shareholder interests at heart, deep moat under construction, yet if there's one thesis killer for me, it's this. I've been in enough aviation/aeronautics trades before to know how easily the certification and approvals slip. You can be the most efficient company in the world but your partner is a sclerotic state bureaucracy that can't get anything done on time. So the chances are the milestones on which the thesis rests will just keep slipping and the cash runway now at hand will not be nearly enough, so rounds of dilution may be needed. I am not fantasizing this as some edge scenario - just look at Joby and Archer, both imho very capable and serious companies, look at their IPO decks and compare their timelines to the sad reality. Not saying IRR on this investment may not turn out to be decent (I have too much respect for your stock picking instincs to ever suggest that), just saying that if I should bet on a speculative pre-revenue horse, I'd rather do it in an industry where the execution is fully under control of the management, not subject at least partly to the whims of state bureaucrats. Nevertheless, definitely a super interesting watchlist material - many thanks for bringing to my attention.
2. The smaller TAM will be shared with others - not a winner takes all. ASTS has only Starlink as a competitor in a blue sky TAM and wanna be competitors. MRLN has real competitors - Joby (through Xwing acquisition), there’s also Shield AI I think, and the leading player is Reliable Robotics and add legacy defense primes who are also developing this tech.
3. Stock price would need to come down further for better upside. I would say below $3/$2.
4. There doesn’t appear to be a moat thus far and Reliable are the leading player.
This tech will obviously start with defence and cargo. Feasible for passenger aircraft after 2035.
1 - TAM not apples to apples...Direct to device is a always going to be a (single digit) segment within the broader $1trn mobile TAM ....so probably closer than you think...but the numbers regardless are huge.
2 - only real equivalent competitor imo is Reliable Robotics - and their solution leans on remote operation - which doesnt provide the same efficiency benefits to the customer, but probably has a faster reg pathway. An oligopoly would be fantastic (doesnt need to be a duopoly to win big), its a huge market with amazing unit economics, airline engines are oliogolies and Safran / Rolls Royce have $150-200bn market cap ...the others players you mentioned are designing solutions for evtol / bespoke hardware as opposed to designing a solution to applied broadly across platforms (ie existing / regular fixed wing planes)....so shield / joby etc are swimming in a different lane imo (analogy flagging Iridium as "comeptitor" to ASTS via offering direct to device via bespoke handsets vs unmodified ones) - might emerge as competitors in the future, but not comparable today.
3 - if Merlin halves first before going on a run like ASTS i'd be very happy....not trying to bottom tick it
4 - the moat is the progress made thus far...equivalent a pharma company that made it to phase 3 after progressing through phase 1, 2 etc - that is progress that others havent made and can't spin up overnight - takes both time and tech....and even if shield/joby decided to enter - if Merlin / Reliable get to the finish line (ie have an working + approved solution before they have an approved product....they'd be in a position to sign up all customers interested, and there would be real switching costs for those customers, given sunk cost on hardare installations etc.
i dont bother too much with TAM/SAM/SOM stuff.....but $100bn of annual spend on pilots is a huge number, and rising above inflation, the solution is software based (so high margin)...so the PROFIT pool (which is what matters imo) could be substantial if ends up being a cosy oligopoly...which i think it will.
GE Aero, Safran, Rolls Royce....all trade between 20-30x 2030 FCF (ie 4 years out).....Not a crazy framework to think about how MRLN / Reliable Robotics could be valued in 3-4 years.
Re Biotech - not a sector i play in....too difficult
Really interesting find. You gotta love almost everything about the company - serious mngmt with skin in the game, cash runway, preservation of shareholder interests at heart, deep moat under construction, yet if there's one thesis killer for me, it's this. I've been in enough aviation/aeronautics trades before to know how easily the certification and approvals slip. You can be the most efficient company in the world but your partner is a sclerotic state bureaucracy that can't get anything done on time. So the chances are the milestones on which the thesis rests will just keep slipping and the cash runway now at hand will not be nearly enough, so rounds of dilution may be needed. I am not fantasizing this as some edge scenario - just look at Joby and Archer, both imho very capable and serious companies, look at their IPO decks and compare their timelines to the sad reality. Not saying IRR on this investment may not turn out to be decent (I have too much respect for your stock picking instincs to ever suggest that), just saying that if I should bet on a speculative pre-revenue horse, I'd rather do it in an industry where the execution is fully under control of the management, not subject at least partly to the whims of state bureaucrats. Nevertheless, definitely a super interesting watchlist material - many thanks for bringing to my attention.
Great post but a few counters.
1. The TAM isn’t as large as ASTS’s
2. The smaller TAM will be shared with others - not a winner takes all. ASTS has only Starlink as a competitor in a blue sky TAM and wanna be competitors. MRLN has real competitors - Joby (through Xwing acquisition), there’s also Shield AI I think, and the leading player is Reliable Robotics and add legacy defense primes who are also developing this tech.
3. Stock price would need to come down further for better upside. I would say below $3/$2.
4. There doesn’t appear to be a moat thus far and Reliable are the leading player.
This tech will obviously start with defence and cargo. Feasible for passenger aircraft after 2035.
Just my 2c
1 - TAM not apples to apples...Direct to device is a always going to be a (single digit) segment within the broader $1trn mobile TAM ....so probably closer than you think...but the numbers regardless are huge.
2 - only real equivalent competitor imo is Reliable Robotics - and their solution leans on remote operation - which doesnt provide the same efficiency benefits to the customer, but probably has a faster reg pathway. An oligopoly would be fantastic (doesnt need to be a duopoly to win big), its a huge market with amazing unit economics, airline engines are oliogolies and Safran / Rolls Royce have $150-200bn market cap ...the others players you mentioned are designing solutions for evtol / bespoke hardware as opposed to designing a solution to applied broadly across platforms (ie existing / regular fixed wing planes)....so shield / joby etc are swimming in a different lane imo (analogy flagging Iridium as "comeptitor" to ASTS via offering direct to device via bespoke handsets vs unmodified ones) - might emerge as competitors in the future, but not comparable today.
3 - if Merlin halves first before going on a run like ASTS i'd be very happy....not trying to bottom tick it
4 - the moat is the progress made thus far...equivalent a pharma company that made it to phase 3 after progressing through phase 1, 2 etc - that is progress that others havent made and can't spin up overnight - takes both time and tech....and even if shield/joby decided to enter - if Merlin / Reliable get to the finish line (ie have an working + approved solution before they have an approved product....they'd be in a position to sign up all customers interested, and there would be real switching costs for those customers, given sunk cost on hardare installations etc.
What TAM/SAM/SOM numbers do you see for MRLN, specifically?
Yes, below 5$ it’ll be very interesting and I will start a position from now and hopefully it goes down further so I can add.
Do you also look into biotech with similarities your blueprint?
i dont bother too much with TAM/SAM/SOM stuff.....but $100bn of annual spend on pilots is a huge number, and rising above inflation, the solution is software based (so high margin)...so the PROFIT pool (which is what matters imo) could be substantial if ends up being a cosy oligopoly...which i think it will.
GE Aero, Safran, Rolls Royce....all trade between 20-30x 2030 FCF (ie 4 years out).....Not a crazy framework to think about how MRLN / Reliable Robotics could be valued in 3-4 years.
Re Biotech - not a sector i play in....too difficult