Zacks Industry Outlook Highlights Globalstar, Iridium Communications and Telesat

For Immediate ReleaseChicago, IL – November 22, 2024 – Today, Zacks Equity Research discusses Globalstar GSAT, Iridium Communications IRDM and Telesat Corp. TSAT.Industry: Satellite and CommunicationLink:https://www.zacks.com/commentary/2373261/3-stocks-to-watch-from-the-satellite-and-communication-industryThe Zacks Satellite and Communication industry participants are well-poised to gain from an increasing proliferation and cheaper access to space technology. This trend is leading to a diversification in end-market users. AI, Machine Learning and Big Data have given rise to multiple use cases across industries like oil and gas, agriculture, transportation and non-governmental organizations.Geopolitical competition in space as a contested domain is boosting investments by global militaries. Globalstar, Iridium Communications and Telesat Corp. have significant growth potential on global security threats, surging defense budgets and demand for high-quality imagery and value-added services. However, volatile macroeconomic challenges, inflation and supply chain dynamics could affect the companies' growth prospects.Industry DescriptionThe Zacks Satellite and Communication industry comprises space technology companies that provide satellite imagery, intelligence services and spacecraft and robotics for space exploration, research and national security. They help customers understand and navigate the evolving planet, deliver global broadband communications and explore space.These companies provide communication services to media businesses, fixed and wireless telecommunications operators, data networking providers and Internet service providers. They also offer commercial satellite communication services to government and military organizations. The firms provide satellite-based consulting and technical services, including the lifecycle of satellite operations and infrastructure, ranging from satellite and launch vehicle procurement to telemetry and commanding services.What's Shaping the Industry's Future?Advancements in Technology Hold the Key: There has been a radical change in highly specialized satellite manufacturing patterns. More emphasis is put on using ordinary buses and computer-aided design tools to customize the communications payloads. A mass-produced system is adopted, and several satellites are manufactured in an assembly line. Integration and testing have become highly automated.The extent of testing is lowered after prototyping and initial production is completed. Countries with comprehensive space programs have distinct military, economic and scientific advantages. However, complexity and barriers to entry into space have allowed only a few to develop notable capabilities. The demand for small satellites across regions is expected to increase over time.North America has the bulk of the market share, followed by the Asia Pacific, Europe and the rest of the world. North America maintains its dominance with the highest number of small satellite launches by government end users. The companies continue to align their products and services with the U.S. Department of Defense’s National Defense Strategy needs and the growing international defense and intelligence demand.Subscriber Momentum to Drive Growth: Wide proliferation and cheaper access to space technology have diverse end-market users. The companies share a strategic relationship with various government organizations, including military and disaster response agencies and non-governmental organizations, to provide robust, tactical, real-time voice and low-latency data command and control communications.A comprehensive product portfolio enables companies to expand their customer base and offset the losses from one product category with benefits from another. High product quality increases brand loyalty and enhances performance in a competitive market. For civil customers, notably NASA, growth is being driven by space exploration programs.For commercial customers, growth drivers include a strong demand for imagery due to new use cases, space-based remote sensing, Geosynchronous Equatorial Orbit (GEO) replacement demand and Low Earth Orbit (LEO) communications programs. Also, personal satellite communications are witnessing strong demand, leading to subscriber growth.Spending on Space Infrastructure Could be Affected by Macroeconomic Weakness: With more than half of revenues from U.S. government customers, the industry will likely benefit from increasing defense and space infrastructure budgets. The explosion of space-based intelligence, surveillance, and reconnaissance and communications is expected to boost government investments in the sector.However, weakness in global macroeconomic conditions could compel customers to lower spending, which does not bode well for industry participants. Volatile supply chain dynamics and inflation could lead to higher costs and increased lead time, which are major concerns. Also, investor uncertainty amid a broader market slowdown is a hurdle.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Satellite and Communication industry is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #29, which places it in the top 12% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.Before we present a few satellite and communication stocks you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.Industry Underperforms Sector, S&P 500In the past year, the Zacks Satellite and Communication industry underperformed the S&P 500 composite and the broader Zacks Computer and Technology sector.The industry has gained 11.2% over this period compared with the S&P 500’s increase of 30%. The broader sector has moved up 32.7%.Industry's Current ValuationThe Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing satellite and communication stocks. The industry has a trailing 12-month EV/EBITDA of 6.66X compared with the S&P 500’s 18.39X. The sector’s trailing 12-month EV/EBITDA stands at 17.72X.In the past five years, the industry has traded as high as 24.3X and as low as 4.21X, with a median of 7.14X.3 Stocks to Watch as Industry ReboundsGlobalstar: Headquartered in Covington, LA, Globalstar offers satellite voice and data services to commercial and recreational users in more than 120 countries worldwide. Its products include mobile and fixed satellite telephones, simplex and duplex satellite data modems, and flexible service packages. Globalstar serves various sectors, such as oil and gas, government, mining, forestry, commercial fishing, utilities, military, transportation, and heavy construction.The company’s efforts to boost the development of its spectrum and wholesale capacity services (especially within government and consumer verticals) bode well. GSAT’s XCOM RAN is specifically designed to support mission-critical, high-performance wireless applications. This technology, when combined with Globalstar’s licensed n53 mid-band spectrum, creates a powerful solution for private and enterprise 5G networks.Its strategic collaboration with Liquid Intelligent Technologies, a subsidiary of Cassava Technologies, to deliver reliable and high-speed 5G connectivity across Africa, the Middle East and the Gulf, particularly in sectors like mining and high-end enterprise markets, will boost its footprint in these emerging markets.GSAT also recently announced that it is looking to transfer its listing to Nasdaq in the first quarter of 2025. Its board of directors has authorized a reverse stock split pertaining to this listing transfer. The reverse stock split is aimed at liquidity improvement and increased investment participation from various institutional investors.In the last reported quarter, GSAT reported a 25% increase in revenues, while service revenues increased 28%. This was mainly due to increasing wholesale capacity services revenues, including an “out-of-period item” worth $7.5 million due to the recognition of performance bonuses for 2023 and part of 2024. The company has updated the lower end of its full-year 2024 revenue guidance. It now expects net sales between $245 million and $250 million, raised from the prior view of $235-$250 million.GSAT currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The current-year earnings are pegged at a loss of 2 cents compared with a loss of 1 cent reported in the previous year.Telesat Corporation: Based in Ottawa, Canada, Telesat is a global satellite operator. Its Telesat Lightspeed network (Low Earth Orbit satellite constellation) has been streamlined to meet the needs of telecom, government, maritime and aeronautical clients. TSAT has inked funding arrangements with the governments of Canada and Quebec for its Telesat Lightspeed network.In the last reported quarter, Telesat’s revenues of $138 million declined 20.9% year over year, mainly due to a reduction in services and a lower renewal rate for a long-term agreement with a North American direct-to-home television client. As of Sept. 30, 2024, Telesat's contracted backlog for future services stood at $1 billion. This does not include revenue commitments associated with Telesat Lightspeed. Fleet utilization stood at 73.3%.For 2024, Telesat expects revenues to be near the upper end of the guidance range of $545-$565 million.TSAT currently carries a Zacks Rank #2. The current-year earnings are pegged at a loss of 29 cents compared with a loss of 45 cents reported in the previous yearIridium Communications: Iridium is a satellite communications company that offers dedicated commercial global voice and data communications services to businesses and governments in the United States and globally. It also works with non-governmental organizations.Solid demand across all three business segments and extensive cost discipline are aiding Iridium’s performance. In the last reported quarter, total Service revenues rose 5% year over year to $159.9 million. Strong recurring revenues from increasing subscriber engagements led to the upside. Service revenues contributed 75% to total revenues in the third quarter. The service revenue growth was further fueled by steady momentum in the commercial Internet of Things (IoT). It hosted payload and other data services sectors amid weakness in the commercial broadband sector.Due to the ongoing projects on the Space Development Agency, engineering and support revenues increased 25% from the prior-year level. Driven by strong results, the company raised its full-year 2024 outlook. It now expects OEBITDA in the $465-$470 million band, up from the prior view of $460-$470 million. Total service revenue growth of about 5% is expected compared with the prior view of 4-6%. However, it expects equipment sales for 2024 to fall year over year, aligning with pre-2022 levels.Iridium carries a Zacks Rank #3 (Hold) at present. The consensus estimate for its current-year earnings is pegged at 80 cents, unchanged in the past seven days.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Iridium Communications Inc (IRDM): Free Stock Analysis Report Globalstar, Inc. (GSAT): Free Stock Analysis Report Telesat Corporation (TSAT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks