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Here's Why ViaSat's (VSAT) Share Price is Gaining Momentum

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Over the past two years, and maybe even longer than that, ViaSat Inc. (VSAT - Free Report) stock has seen largely range-bound trading. The stock has just started to look up in the past few months, with the company enjoying several robust growth catalysts and a favorable macroeconomic environment.

The ViaSat-2, a project which the company started back in May 2013, is set to enter service next month. ViaSat’s earnings have been hurt in recent times by the escalating research and development costs related to ViaSat-2 and ViaSat-3, and ramped-up expenses, ahead of offering subscribers service with its new high-speed satellite.

Nevertheless, with ViaSat-2 set to commercialize soon, the pressure on earnings should lessen somewhat. Perhaps investors are optimistic on the upcoming earnings as well, as shares of the company have appreciated 17.7% over the past six months, ahead of the industry’s average gain of 5.5%.

ViaSat-2, touted to have twice the bandwidth and seven times more broadband coverage, is a massive improvement over ViaSat-1 and has immense prospects.

The above-mentioned service is anticipated to radically accelerate speeds, cut costs and expand the reach of broadband services across North America, Central America, the Caribbean, and a portion of northern South America as well. The ViaSat-2 satellite system is also anticipated to broaden its footprint in order to cover the primary aeronautical and maritime routes across the Atlantic Ocean between Europe and North America.

Separately, ViaSat’s Government Systems business has been outstanding in recent times and is gradually gaining even greater momentum. The segment’s growth is being driven by an expanding service base and strong momentum in tactical data-link products, government mobility platforms, and secure networking products.

In-flight connectivity is also sustaining robust growth momentum and remains another potential tailwind for ViaSat. The company also projects sound growth in in-flight connectivity, with a significant increase in shipments and installations projected early next fiscal. It anticipates considerable greater growth early in fiscal 2018. In fact, it expects to witness a significant ramp with Gen-2 installs later this fiscal, particularly on American Airlines and Qantas. The Commercial Air business will likely prove to be a key profit driver in the quarters to come.

And this is not all. What investors should be most excited about are the ViaSat-3 satellites. The company asserted that these satellites are expected to individually boast as much bandwidth as all of the satellites currently in the world, combined.

ViaSat expects to roll out three of these satellites next year, two for the Americas and one for Asia. This would triple the world’s satellite capacity, per ViaSat’s numbers. That would also mean that ViaSat would own roughly 75% of the world’s bandwidth. And none of the company’s competitors are anywhere near launching a satellite of that ability at present.

It seems that ViaSat is on its way toward dominance in the satellite-data market, and eventually the huge costs of building and maintaining satellites will smoothen out.

Thus, it may be a good time to reflect on the growth drivers of this Zacks Rank #3 (Hold) stock.

Stocks to Consider

Some better-ranked stocks in the broader space include Comtech Telecommunications Corp. (CMTL - Free Report) , iRobot Corporation (IRBT - Free Report) and ASML Holding N.V. (ASML - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With four back-to-back, robust earnings beats, Comtech has a striking average positive surprise of 88.7%.

iRobot Corporation has a remarkable earnings surprise history. The company recorded an average positive surprise of 92.5% over the trailing four quarters, beating estimates strongly all through.

ASML Holding has an impressive earnings surprise history for the trailing four quarters as well, beating estimates in each quarter, with an average positive surprise of 14.8%.

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