Satellite technology company ViaSat (VSAT) has gained significant footholds in several potentially lucrative markets, including space initiatives by American and European government agencies, as well as satellite internet service.
Moreover, evidence indicates that Wall Street is becoming enamored with VSAT, and the company’s business is generating large cash flows. Further, on the valuation front, the firm’s profile is very attractive.
In light of all of these points, I view VSAT as an excellent choice for growth investors.
Major Footholds With the Pentagon and the European Space Agency
As I noted in a past column, Viasat disclosed in January that it was participating with three other companies in a deal with NASA that will be worth at least $4.8 billion. Under the contract, the companies will provide the space agency with “commercial ground and space (communications) service.”
In February, VSAT announced that it would “provide satellite communications (SATCOM) services” to the U.S. Space Force and Space Systems Command (SSC) Commercial Satellite Communications Office (CSCO). The order itself is only worth $3.5 million. But because the company noted that “this is the first Task Order award for Viasat under the 10-year… (multi-vendor) contract,” which may be worth as much as $13 billion, I think that the firm will probably receive additional, needle-moving revenue from the initiative.
And Viasat is also part of a major space program that has been launched by the EU. Specifically, in March VSAT announced that it had been selected to spearhead “the design and development” of Moonlight, the EU’s attempt “to develop a lunar orbiting Navigation and Communication system that will greatly enhance combined navigation and communications services for European and international missions.”
Satellite Internet in India and on Ships and Planes
In India, VSAT is reportedly partnering with BSNL, the government owned telecom company, to develop satellite internet services. Like AST SpaceMobile (AST), another satellite firm that I profiled recently, VSAT will enable smartphones to interface directly with satellites. However, while AST says that its technology already enables data transmission and video calls from standard smartphones, ViaSat only plans to support messaging in India for now.
Also, while I haven’t come across any information suggesting that AST’s ability to interface with smartphones is limited by any structural issues, ViaSat’s system reportedly can only be used by some smartphones independently, while others must utilize an “external device” to interface with the satellites. Still, as with AST, VSAT could get a big boost by providing internet service to developing countries that lack broadband infrastructure.
Boding well for ViaSat’s maritime internet service, Mitsui O.S.K. Lines agreed to utilize the service, the companies announced in May. Japan-based Mitsui describes itself as “one of the world’s largest and most diversified shipping companies” and reports that it has more than 900 ships.
Meanwhile, VSAT reports that it provides internet service for many major airlines, including American Airlines (AAL), Delta (DAL), jetBlue (JBLU), and Virgin Atlantic.
Becoming a Street Darling and Generating Significant Cash Flow
In the month that ended on July 15, VSAT stock had jumped 13%, while it had soared 85% in the three months that concluded on the same day.
Moreover, in the first quarter, many major Wall Street institutions meaningfully increased their stakes in the name. For example, Vanguard increased its holdings of the shares by 6.33% to 14.64 million shares, while Morgan Stanley hiked its stake by 88.5% to 4.54 million and Goldman Sachs weighed in with a 65% gain to 2.866 million shares.
Overall, institutions purchased 24.4 million shares of VSAT and sold just 13.39 million shares of the name in Q1.
On the cash flow front, VSAT generated operating cash flows of $239 million, $219 million, and $298 million in the last three quarters of its fiscal year that ended in March.
Valuation and the Bottom Line on VSAT
The shares are changing hands at a tiny price-sales ratio of just 0.44. Given VSAT’s huge potential, the stock is very attractive at its current levels.
*This article is intended to be informational only; it is not financial advice.
