How will Amazon support Kuiper? Barclays weighs in on Investing.com

Investing.com – Amazon’s Kuiper satellite project has sparked debate among investors, particularly regarding its financial impact on the company’s sales channels.

Project Kuiper is the company’s effort to increase Internet access worldwide through a constellation of more than 3,000 satellites in low Earth orbit.

In Thursday’s letter, Barclays (LON:) analysts have estimated that Kuiper’s losses will peak at $3.3 billion by 2025, representing an 80-basis-point hug on operational income (OI) margins.

However, Barclays offers a significant projection for the “core” sales of Amazon’s OI, which is still about 450 points below 2018 levels.

Barclays notes that Kuiper operates in a promising $61 billion market, connecting consumers and businesses with broadband, direct-to-device communication, aviation and more.

However, they realize that producing Kuiper satellites is expensive.

Barclays says each rocket launch could cost as much as $150 million, with United Launch Alliance (ULA) delays starting to raise costs in 2025.

“We expect OI drawdown to be in the range of $500 million to $700 million” for Amazon’s first-quarter 2025 guidance, the bank’s analysts said.

“Kuiper needs 578 satellites before it can launch its service FCC (BME:) license, which we expect Amazon (NASDAQ:) to reach around mid-2026,” says Barclays.

Once up and running, the bank believes Kuiper can leverage Amazon’s e-commerce and Prime ecosystem to gain a competitive advantage.

With SpaceX’s Starlink commercial going on for five years, Barclays sees the industry becoming an “attractive two-player market” with room for both players to thrive.

Stripping out the estimated donation ad, Barclays estimates that Amazon could achieve an additional 200 to 300 points in online development.

This growth opportunity is said to provide financial flexibility to support Kuiper as well as other long-term trends, such as AI, groceries and equipment, analysts concluded.

As Barclays emphasizes, “Retail OI and the impact that Kuiper can have on it will be one of the most important discussions around Amazon for the next 12-18 months.”