Starlink Can Earn $6 Billion With 12k Satellites Says Cathie Wood’s Ark Invest

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Space Exploration Technologies Corp.'s (SpaceX) Starlink satellite internet constellation will have an addressable market of $6 billion, believes Cathie Wood's investment management firm, Ark Invest. Ark's projections for Starlink were shared by its analyst Sam Korus through a Medium post, with the analyst modeling the data based on a significant number of Starlink satellites deployed. His models reveal that SpaceX can target two distinct user sets with Starlink, with both having a roughly equal addressable market globally. Starlink currently has roughly 1,600 satellites in orbit after SpaceX took a breather from its aggressive launch cadence, which it had maintained until May this year.

Starlink Can Serve Up To 30 Million Users With 12,000 Satellites Believes Ark Invest

The data analyzed by the investment firm uses a couple of key assumptions. First of all, it bases its conclusions on a 12,000 Starlink satellite constellation, which will take years for SpaceX to deploy through its Falcon 9 rocket. However, its new rocket, Starship, which is currently under development in Boca Chica, Texas, will vastly expand its ability to launch the satellites. SpaceX's executives have hinted that Starship can carry as many as 400 satellites, and due to the new rocket's powerful second or upper stage, it can also deliver them faster to their orbits than the Falcon 9 can.

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Ark's estimate of 12,000 satellites for Strlinnk is based on the number of satellites that the Federal Communications Commission (FCC) has currently authorized SpaceX to deploy. The FCC's first approval for the deployment came in March 2019,  when it allowed the deployment of 4,425 Starlink satellites. In November, eight months after, this was followed by another order that authorized the deployment of another 7,518 satellites to bring the total tally up to roughly 12,000 spacecraft.

In addition to these, SpaceX has also requested the Commission to let it deploy 30,000 spacecraft at significantly lower altitudes than the original spacecraft. These second-generation satellites are thought to form the backbone of Starlink's global connectivity aims. They will feature major changes such as higher capacities and manufacturing cost-effectiveness than the first two batches approved by the Commission.

Ark Investment's market model for Starlink concludes that the service can earn roughly the same revenue from two different user categories with different budgets. Image: Sam Korus/Medium

Using monthly broadband prices, average download speeds and cost of internet globally, adjusted by gross domestic product (GDP), Korus came up with two ranges of prices that users will be willing to pay for Starlink. One of these, the $75 - $100 range, is the one Starlink is currently targeting as the monthly subscription fees for its beta users sit at $99. The second range is the $10 - $20 subscription fee, with both having roughly the same total addressable market (TAM).

As is natural in demand and supply economics, the annual addressable revenue for the lower subscription fee band is slightly higher, crossing $6 billion. However, this comes with the natural uptick in the number of users using Strlik, and it will be a significant constraint for the internet service to overcome.

The analyst follows up his revenue estimate with a model of the users belonging to each category, and the difference is quite stark.

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Starlink will have to serve roughly six times the users for the lower price bracket to earn the same revenue from the two major addressable revenues. Image: Sam Korus/Twitter

Matching the monthly subscription fee with the addressable user count, the analyst reveals that the lower price bracket ($10 - $20) will require Starlink to service more than 30 million users to gain access to the $6 billion revenue pie. This is five times the additional users for the $75 - $100 bracket, which requires serving a little over 5 million users.

SpaceX has also requested the FCC to increase its license authorization of one million user terminals to five million. This request was made in August last year, and it came soon after the company received the authorization for deploying the one million dishes.

Starlink has shipped 100,000 user terminals so far, revealed SpaceX chief Mr. Elon Musk late last month. Musk's company also plans to manufacture "millions" of these terminals in a new factory in Austin, Texas, as it scales up its plans for global coverage to fund interplanetary space exploration.

The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.
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