Globalstar, Inc. (NYSEAMERICAN:GSAT) is one of the biggest gainers in the pre-market session on Monday after analyst at B. Riley Securities initiated coverage on the stock with a Buy rating and set a price target of $3.25.
Key Highlights:
- B. Riley Securities initiates GSAT with a Buy and price target of $3.25. Analyst Mike Crawford said, “We believe Globalstar and its sponsors, after years of development, support, and patience, are at long last starting to realize a return on satellite system and spectrum assets, making 2021 an excellent time, in our opinion, to buy GSAT before the market digests this change.
- We believe many investors perceive GSAT as a long-suffering, over-leveraged mobile satellite services (MSS) provider with spectrum assets that have been difficult to monetize. In contrast, our investment thesis is that Globalstar has moved through the high-risk portion of its history and is now poised to start generating returns on its hard-fought terrestrial spectrum authorization, primarily including 11.5 MHz of 2.4 GHz S-Band spectrum in the U.S., as well as 16.5 MHz of 2.4 MHz international spectrum with no power limitations. GSAT also operates a sunk-cost MSS business that is generating positive operating cash flow, which we believe actually bottomed in 1Q21.
- As such, we see Globalstar’s low-data-rate satellite business returning to growth, with cash flow further bolstered by domestic and international spectrum monetization agreements—and with GSAT’s first $1.8B of profitability sheltered by a massive NOL that is hidden on the balance sheet by a $381M deferred tax asset valuation allowance. These aforementioned assets alone more than cover the debt and equity at current levels, in our opinion, plus GSAT has a powerful, low-theta option in the form of some 59 MHz of 5.1 GHz C-Band spectrum—representing nearly 20B MHz-POPs—as well as 8.7 MHz of 1.6 GHz LBand spectrum that the company could monetize down the road, as well. At the high end, we estimate that this C-Band spectrum alone could be worth some $15B.
- For now, based on a midcase sum-of-the-parts analysis of GSAT’s terrestrial spectrum, MSS, and tax assets, we arrive at a targeted $4.5B EV and a $2.35 stock price. Plus, we factor in just a 15% value realization probability to GSAT’s C-Band and L-Band spectrum, at the midpoint adding ~$0.90/share to our inaugural SOTP, to constitute our $3.25/share PT.”
Market Reaction
As of 8, GSAT is trading higher by 8% to $1.39. So far more than 11K shares have exchanged hands.
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