Globalstar Stock Price Rises 17%, Time to Buy GSAT Stock Now?
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Globalstar stock jumped over 17% yesterday and was trading higher in US premarket price action today also. Why is GSAT stock rising and should you buy it now?
Globalstar is a US-based provider of satellite solutions for businesses and individuals. The company offers customizable Satellite Commercial IoT Solutions, equipment monitoring, and fleet asset tracking connectivity for mobile and field personnel.
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Why GSAT stock spiked
GSAT is a penny stock as it trades below $5 which is the threshold set by the US SEC to categorize penny stocks. The company has a market capitalization of around $2.7 billion. GSAT stock has looked strong in 2021 and is up 346% year-to-date. However, it still trades at almost half of its peaks.
GSAT stock rose sharply yesterday after B. Riley issued a bullish note on the stock. The brokerage initiated coverage on GSAT stock with a buy rating and a target price of $3.25. The target price implies an upside of over 115% over yesterday’s closing prices. According to B. Riley, Globalstar has “moved through the high-risk portion of its history and is now poised to start generating returns.”
Riley issued a bullish note
According to B. Riley’s analyst Mike Crawford “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.”
The analyst believes that GSAT would now start monetizing its 2.4 gigahertz S-Band spectrum in the US and its 2.4-megahertz international spectrum. The bullish forecast from a well-known brokerage triggered a buying spree in GSAT stock.
GSAT stock forecast
Prior to B. Riley, only Morgan Stanley was covering the stock and had an underweight rating and a $0.55 target price. B. Riley’s target price is almost six times what Morgan Stanley valued the company in January. Thanks to the bullish note from B. Riley, GSAT stock spiked yesterday and its trading volumes jumped to over 155 million which were way above the average volumes of around 19 million shares.
GSAT stock hit an intraday high of $1.66 yesterday and made an intraday low of $1.37. The stock eventually closed at $1.51 which was 17.05% higher than its previous day’s closing.
Globalstar stock technical analysis
After the spike, Globalstar stock has crossed its 50-day SMA (simple moving average) and 100-day SMA which is a bullish indicator. The stock however is approaching the overbought levels with a 14-day RSI (relative strength index) of 61.2. RSI values above 70 indicate overbought positions while RSI below 30 is seen as a sign of oversold positions.
GSAT financials
GSAT reported revenues of $128.5 million in 2020 which were 2.5% lower than what the company reported in 2019. Analysts expect its revenues to fall 13.5% in 2021 also but are forecasting them to rise 12.1% to $125 million in 2022. The company is positive on the EBITDA level and posted an EBITDA of $42.2 million in 2020 with a healthy margin of 32.8%.
Analysts however expect the EBITDA margin to fall to 23.9% this year before rising to 28.6% in 2022. Meanwhile, the company is making losses on the net profit level and posted an adjusted loss of $101 million in 2020 which is expected to rise to $121 million in 2021. Analysts expect the company’s net losses to narrow to $104 million in 2022.
Valuations
Looking at the valuations, GSAT stock trades at an NTM EV (enterprise value)-to-sales multiple of 27.1x and an NTM EV-to-EBITDA multiple of 107.5x. On the face of it, the multiples look high. However, the company is in the process of monetizing its spectrum and the earnings and profitability will improve in the future.
The company is optimistic about the monetization plans and during the first quarter 2021 earnings call, Jay Monroe, Executive Chairman of Globalstar said “A few quarters ago we laid out the process to get to commercialization of our spectrum. We will soon be at the point where the only impediment to terrestrial deployments will be commercial negotiations.”
He added, “The Commercial IoT effort is also progressing and showing increasing traction with large customers. I am confident the team is creating the right products for where that market is going. We believe we will be able to offer customers remote connectivity at a value which is hard for others to match.”
GSAT stock
GSAT is in an emerging industry as the demand for IoT and satellite devices is expected to go up sharply in the coming years. The company has taken several strategic actions to streamline the business and has also launched Commercial IoT units for the animal tracking deployment with its partner in Australia. The company sees it as a future growth driver.
GSAT stock looks attractive based on the strong growth outlook and reasonable valuations. As B. Riley summed up, the strong future growth “makes 2021 an excellent time to buy GSAT before the market digests this change.”
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