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Prospects Look Bright for Satellite and Communication Stocks
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The Zacks Satellite and Communication industry comprises providers of satellite service operations, broadband satellite technologies and Internet services. The companies offer a range of communications services to media firms, fixed and wireless telecommunications operators, data networking providers, Internet service providers and commercial satellite communication services to government and military organizations.
The industry participants also offer satellite-related consulting and technical services that include the lifecycle of satellite operations and infrastructure ranging from satellite and launch vehicle procurement through telemetry and commanding services. Some of the firms provide satellite voice and data services to commercial and recreational users. They also deliver various on-network services. These include transponder services, managed services, teleport facilities and other ground facilities to provide monitored broadband, video and private network services to customers.
Let’s take a look at three major themes in the industry —
• The global satellite communication landscape has gained traction with the wide proliferation of satellite broadband services, arrival of direct-to-home TV offerings and advancement of digital technology. This has fostered demand for commercial and government welfare schemes. Remarkably, wireless backhaul services have generated additional revenues for satellite operators as consumers desire extensive coverage with the expansion of mobile Internet connections. The usage of satellite communication services for IoT and in disaster management areas in developed regions is expected to boost the market.
• In order to cater to the increased data demand for mobile connectivity, satellite service players have made significant investments in R&D activities to be on par with emerging technologies and keep their product lines up to date. Technological advancements have led to the convergence of terrestrial mobile phones and satellites. In addition, augmenting 5G mobile networks with next-generation satellite capabilities is helping mobile satellite operators enhance their bottom line. Spurred by the increasing demand for public safety and augmented reality, the fundamentals of the industry appear promising.
• Growing demand for small satellite constellations with enhanced deployment for commercial end users, and easy accessibility and progress in satellite miniaturization are fueling market growth. The industry’s growth projections are determined by factors such as high manufacturing costs, delay in signals and need for replacements. The price of technology includes the cost of satellite manufacturing, launch of satellites through a space shuttle and investments in base stations to manage satellites. Small satellite market is anticipated to grow owing to the significant rise in demand from developing economies. Key players are adopting numerous strategies such as acquisition, collaboration, product development and business expansion to stay competitive.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Satellite and Communication industry, which has eight constituent companies, is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #53, which places it at the top 21% of 254 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is an outcome of positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. The industry’s earnings estimates for the next fiscal have surged a phenomenal 1900% in the past four months.
Before we present a few satellite and communication stocks that are well positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms Sector, S&P 500
The Zacks Satellite and Communication industry has underperformed both the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 12.6% over this period against the S&P 500’s rise of 1.1% while the broader sector has lost just 1%.
One-Year Price Performance
Industry’s Current Valuation
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 9.94X compared to the S&P 500’s 11.15X. It is trading below the sector’s trailing 12-month EV/EBITDA of 10.99X.
Over the past five years, the industry has traded as high as 16.94X, as low as 2.96X with the median of 9.99X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (Past Five Years)
Bottom Line
The industry is expected to show robust growth on the back of increasing rate of investments by government organizations worldwide. The demand for small satellites across different geographies is likely to witness an upward trajectory, with North America having the bulk of the market share followed by Asia-Pacific, Europe and Rest of the World. North America is anticipated to maintain its dominance on account of maximum number of small satellites launches by government end users.
Greater market penetration of small satellites into disaster management, evolving satellite applications, development of Global Navigation Satellite System, advancements in satellite structure and increase in low-cost launching sites for small launch vehicles are expected to create lucrative opportunities for the market. The commercial end user is likely to witness a high growth rate owing to intensifying R&D activities to develop small satellite constellation for varied applications including navigation, provision of global wireless Internet system and telecommunications.
EchoStar Corporation (SATS - Free Report) : Shares of this Englewood, CO-based satellite and communication firm have gained 9.6% year to date. The Zacks Consensus Estimate for current-year earnings has been revised 5.2% upward over the past 60 days.
Price and Consensus: SATS
Maxar Technologies Inc. : The consensus estimate for this Westminster, CO-based satellite and communication firm’s earnings has jumped 28.4% over the past 60 days. The stock has added a whopping 96.2% in the past six months.
Price and Consensus: MAXR
We are also presenting two stocks with a Zacks Rank #3 (Hold) that are well positioned to grow.
Intelsat S.A. : Shares of this Luxembourg-based satellite and communication firm have rallied 59.3% in the past six months. The Zacks Consensus Estimate for next-year earnings has moved north 26.3% over the past four months. The company has long-term earnings growth expectation of 9.3%.
Price and Consensus: I
Iridium Communications Inc. (IRDM - Free Report) : Shares of this McLean, VA-based satellite and communication firm have returned 19.8% year to date. The Zacks Consensus Estimate for current-year earnings has improved 9.2% over the past 90 days. The company topped earnings estimates thrice in the trailing four quarters, the average positive surprise being 8%.
Price and Consensus: IRDM
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Prospects Look Bright for Satellite and Communication Stocks
The Zacks Satellite and Communication industry comprises providers of satellite service operations, broadband satellite technologies and Internet services. The companies offer a range of communications services to media firms, fixed and wireless telecommunications operators, data networking providers, Internet service providers and commercial satellite communication services to government and military organizations.
The industry participants also offer satellite-related consulting and technical services that include the lifecycle of satellite operations and infrastructure ranging from satellite and launch vehicle procurement through telemetry and commanding services. Some of the firms provide satellite voice and data services to commercial and recreational users. They also deliver various on-network services. These include transponder services, managed services, teleport facilities and other ground facilities to provide monitored broadband, video and private network services to customers.
Let’s take a look at three major themes in the industry —
• The global satellite communication landscape has gained traction with the wide proliferation of satellite broadband services, arrival of direct-to-home TV offerings and advancement of digital technology. This has fostered demand for commercial and government welfare schemes. Remarkably, wireless backhaul services have generated additional revenues for satellite operators as consumers desire extensive coverage with the expansion of mobile Internet connections. The usage of satellite communication services for IoT and in disaster management areas in developed regions is expected to boost the market.
• In order to cater to the increased data demand for mobile connectivity, satellite service players have made significant investments in R&D activities to be on par with emerging technologies and keep their product lines up to date. Technological advancements have led to the convergence of terrestrial mobile phones and satellites. In addition, augmenting 5G mobile networks with next-generation satellite capabilities is helping mobile satellite operators enhance their bottom line. Spurred by the increasing demand for public safety and augmented reality, the fundamentals of the industry appear promising.
• Growing demand for small satellite constellations with enhanced deployment for commercial end users, and easy accessibility and progress in satellite miniaturization are fueling market growth. The industry’s growth projections are determined by factors such as high manufacturing costs, delay in signals and need for replacements. The price of technology includes the cost of satellite manufacturing, launch of satellites through a space shuttle and investments in base stations to manage satellites. Small satellite market is anticipated to grow owing to the significant rise in demand from developing economies. Key players are adopting numerous strategies such as acquisition, collaboration, product development and business expansion to stay competitive.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Satellite and Communication industry, which has eight constituent companies, is housed within the broader Zacks Computer and Technology sector. It currently carries a Zacks Industry Rank #53, which places it at the top 21% of 254 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is an outcome of positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. The industry’s earnings estimates for the next fiscal have surged a phenomenal 1900% in the past four months.
Before we present a few satellite and communication stocks that are well positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms Sector, S&P 500
The Zacks Satellite and Communication industry has underperformed both the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 12.6% over this period against the S&P 500’s rise of 1.1% while the broader sector has lost just 1%.
One-Year Price Performance
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Industry’s Current Valuation
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 9.94X compared to the S&P 500’s 11.15X. It is trading below the sector’s trailing 12-month EV/EBITDA of 10.99X.
Over the past five years, the industry has traded as high as 16.94X, as low as 2.96X with the median of 9.99X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (Past Five Years)
Bottom Line
The industry is expected to show robust growth on the back of increasing rate of investments by government organizations worldwide. The demand for small satellites across different geographies is likely to witness an upward trajectory, with North America having the bulk of the market share followed by Asia-Pacific, Europe and Rest of the World. North America is anticipated to maintain its dominance on account of maximum number of small satellites launches by government end users.
Greater market penetration of small satellites into disaster management, evolving satellite applications, development of Global Navigation Satellite System, advancements in satellite structure and increase in low-cost launching sites for small launch vehicles are expected to create lucrative opportunities for the market. The commercial end user is likely to witness a high growth rate owing to intensifying R&D activities to develop small satellite constellation for varied applications including navigation, provision of global wireless Internet system and telecommunications.
Two stocks in the landscape currently sport a Zacks Rank #1 (Strong Buy) that investors may consider betting on now. You can see the complete list of today's Zacks #1 Rank stocks here.
EchoStar Corporation (SATS - Free Report) : Shares of this Englewood, CO-based satellite and communication firm have gained 9.6% year to date. The Zacks Consensus Estimate for current-year earnings has been revised 5.2% upward over the past 60 days.
Price and Consensus: SATS
Maxar Technologies Inc. : The consensus estimate for this Westminster, CO-based satellite and communication firm’s earnings has jumped 28.4% over the past 60 days. The stock has added a whopping 96.2% in the past six months.
Price and Consensus: MAXR
We are also presenting two stocks with a Zacks Rank #3 (Hold) that are well positioned to grow.
Intelsat S.A. : Shares of this Luxembourg-based satellite and communication firm have rallied 59.3% in the past six months. The Zacks Consensus Estimate for next-year earnings has moved north 26.3% over the past four months. The company has long-term earnings growth expectation of 9.3%.
Price and Consensus: I
Iridium Communications Inc. (IRDM - Free Report) : Shares of this McLean, VA-based satellite and communication firm have returned 19.8% year to date. The Zacks Consensus Estimate for current-year earnings has improved 9.2% over the past 90 days. The company topped earnings estimates thrice in the trailing four quarters, the average positive surprise being 8%.
Price and Consensus: IRDM
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +98%, +119% and +164% in as little as 1 month. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>