Viasat (VSAT) recently reported fiscal fourth-quarter results that were impressive in many respects, and the company has multiple, powerful, positive catalysts that should propel VSAT stock much higher in the short, medium, and long terms.
What’s more, the firm’s new board members are also likely to help boost the stock within the next year.
In light of all of these points, along with the shares’ attractive valuation, VSAT stock appears to be a good name for investors to buy.
Generally Strong Q4 Results
In Q4, the company’s backlog jumped 15% versus the same period a year earlier to a record $4.1 billion, as the value of the contracts that it received in Q4 climbed 9% year-over-year to $1.3 billion. Finally, its operating cash flow came in at $322 million, up from $298 million during Q4 of the previous year.
Some of Viasat’s other Q4 metrics were depressed by an expected downturn in its satellite broadband revenue and its increased investments in its satellites. For example, its Q4 revenue increased just 2% YOY to $1.2 billion, while its EBITDA, excluding certain items, edged down 1% YOY to $370 million. But the firm expects its revenue from fixed broadband to rebound when its Viasat-3 satellite, which was launched successfully on April 29, enters service in August or September.
And Viasat’s satellites, as will be explained in the next section, should generate a great deal of revenue for the company over the longer term. Indeed, based on the impressive growth of its backlog and contract awards last quarter, the latter process appears to be occurring already.
Near-and-Medium-Term Positive Catalysts
As mentioned above, the activation of VSAT’s Viasat-3 satellite, expected to occur in August or September, will drive a meaningful increase in its fixed broadband revenue, according to the firm’s CEO Mark Dankberg, who was speaking on its May 28 earnings call. Also likely to boost the firm’s broadband business in the short-to-medium term is increased demand for broadband-satellite services, the CEO stated.
And the anticipated growth of the U.S. government’s investments in space is expected to boost the metrics of the firm’s Defense and Advanced Tech (DAT) unit in the near-to-medium term. One growth engine for DAT that looks poised to boost VSAT’s earnings in both the near term and the longer term is small, inexpensive, communications satellites, known as Protected Satellites-Global (PTS-G) that Washington is seeking to launch.
VSAT recently received a follow-on contract related to PTSG satellites, and Dankberg stated that the U.S. is eventually looking to launch “a substantially larger fleet of much smaller agile satellites,” creating “a multibillion dollar opportunity” for Viasat.
Meanwhile, since the company’s maritime WiFi business has a rather large backlog of 1,500 ships, the latter business’ revenue should grow prolifically in the near-to-medium term,. Similarly, VSAT’s commercial airplane WiFi business has 1,000 commercial aircraft in its backlog, while the value of the awards and backlog of the firm’s Government SATCOM unit jumped 18% YOY in Q4.
Longer-Term Upbeat Catalysts
Viasat’s alliance with Space42, through a joint venture called Equatys, appears to be progressing well. As I explained in a previous article, Equatys “’is expected to launch a satellite-based network that will offer service to standard smartphones and (Internet of Things) devices.’”
For the first time, Dankberg provided a target date for the joint venture to begin providing service, as he stated that the firms are seeking to launch its operations in 2029. But he indicated that VSAT would be able to recognize “significant revenue” from providing technology to Equatys before 2029.
The CEO also indicated that Equatys could generate revenue either by providing its own direct-to-satellite service to mobile devices and/or by allowing a joint venture that has been formed by U.S. telecom companies to utilize Equatys’ infrastructure in order to offer the service.
Also indicating that the rollout of Equatys is proceeding smoothly, Viasat disclosed that it would hold an event in order to discuss the joint venture with investors. However, VSAT did not disclose when the event would take place.
Finally, Dankberg indicated that Viasat could assist space-based data centers with a wide array of tasks, including launches, “solar power generation,” “radiation hardening,” and ” Space-ground and space-space broadband communications.” All of these initiatives ” overlap key enabling satellite communications technologies,” he explained.
New Board Members and an Attractive Valuation
On May 7, Viasat appointed two new board members –Shekar Ayyar and Jinhy Yoon –in the framework of a deal with activist investor Carronade Capital. Since activist investors tend to want to push stock prices up in the short-to-medium term and Ayyar and Yoon appear to be representing Carronade, there’;s a good chance that they will use their influence on the panel to push VSAT to take steps that will reward shareholders within the next year.
Finally, after a recent pullback, VSAT is changing hands at a low price-sales ratio of 2.35 times.
his article is intended to be informational only; it is not financial advice.
