Terrestrial Networks And Operational Risks Will Erode Satellite Value

Key Takeaways

• Proliferation of terrestrial and low Earth orbit competitors threatens Eutelsat's pricing power, future growth, and margins across both connectivity and video segments.
  
• Integration challenges, regulatory pressures, and evolving media consumption trends could undermine revenue, cash flow stability, and overall profit recovery.
  
• Eutelsat's integration of hybrid satellite technologies, expansion in government and connectivity sectors, and strong shareholder backing secure its position for sustainable growth and market leadership.

Catalysts

Operates telecommunication satellites.

• The rapid expansion of terrestrial fiber-optic and 5G networks, especially in emerging markets, threatens to erode the addressable market for satellite connectivity over the next decade. As these lower-cost, high-bandwidth terrestrial solutions proliferate, both Eutelsat's top-line growth and ability to sustain premium pricing for connectivity services are at risk, exerting structural pressure on long-term revenue trajectories.
  
• Intensifying competition from mega-constellation operators such as Starlink and Kuiper is expected to lead to commoditization of satellite bandwidth, driving down average selling prices and squeezing margins across the sector. Eutelsat's ambitious LEO revenue growth projections could become unattainable if bandwidth prices fall faster than volume can increase, leading to slower revenue growth and persistent EBITDA margin compression.
  
• The integration and ongoing ramp-up of OneWeb's LEO constellation continues to expose Eutelsat to significant operational risks, including the possibility of cost overruns, delays in achieving revenue synergies, and ongoing capital expenditure spikes for satellite replenishment and ground network expansion. These issues threaten to decouple revenue growth from positive free cash flow and may further depress net margins, especially if merger integration proves more complex or expensive than anticipated.
  
• Dramatically higher environmental, regulatory, and geopolitical hurdles raise the risk of forced satellite decommissioning, costly sustainability compliance, or spectrum allocation restrictions. Such pressures could drive up required capital investments and limit international contract wins, directly threatening both earnings growth and future backlog quality.
  
• The shift away from traditional broadcast to streaming and direct digital consumption is accelerating revenue declines in Eutelsat's video segment, which still represents half of total revenues. This trend, compounded by sanctions-driven channel removals, is likely to create a persistent structural drag on consolidated revenues and hinder any return to meaningful profit growth even if the connectivity business expands.

Eutelsat Communications Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Eutelsat Communications compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Eutelsat Communications's revenue will grow by 1.0% annually over the next 3 years.
• The bearish analysts are not forecasting that Eutelsat Communications will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Eutelsat Communications's profit margin will increase from -87.0% to the average GB Media industry of 6.8% in 3 years.
• If Eutelsat Communications's profit margin were to converge on the industry average, you could expect earnings to reach €87.4 million (and earnings per share of €0.18) by about August 2028, up from €-1.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.7x on those 2028 earnings, up from -1.4x today. This future PE is lower than the current PE for the GB Media industry at 11.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.17%, as per the Simply Wall St company report.

Eutelsat Communications Future Earnings Per Share Growth

Risks

• The explosive growth of global internet demand, particularly in underserved areas, continues to drive significant demand for satellite connectivity, and Eutelsat's rapidly rising Low Earth Orbit (LEO) segment-up 84% year-on-year and now at 15% of group revenue-positions the company to capture this opportunity, providing a strong top-line revenue growth engine.
  
• Eutelsat is seeing robust expansion in high-growth segments such as government services (up 24% year-on-year) and fixed connectivity (up 4.3%), while strategic, multi-year contracts with European governments such as the €1 billion, 10-year French Armed Forces deal underpin visible, recurring revenue streams and reinforce backlog stability.
  
• The successful integration of OneWeb's LEO constellation with Eutelsat's GEO assets creates a unique hybrid offering, enabling cross-selling into enterprise, government, and mobility markets, with management guiding to a revenue target of €1.5 to 1.7 billion and EBITDA margin of at least 60 percent by 2028–2029, supporting future earnings growth.
  
• Substantial backing from core shareholders (including states) for the €1.5 billion capital raise ensures enhanced financial flexibility, reduces leverage (targeted to fall from 3.88x to around 2.5x EBITDA), and provides the funding needed for network expansion, which is likely to improve the company's credit profile and lower funding costs.
  
• Industry cycles favor operators with scale and next-generation infrastructure, and Eutelsat's advancing global coverage (expected worldwide in 2026 with over 650 satellites), together with successful acquisition of regulatory licenses in more than 180 countries, gives the company a long-term competitive advantage that can drive market share gains and sustain margin improvement.

Valuation

• The assumed bearish price target for Eutelsat Communications is €1.2, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Eutelsat Communications's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €6.7, and the most bearish reporting a price target of just €1.2.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €1.3 billion, earnings will come to €87.4 million, and it would be trading on a PE ratio of 8.7x, assuming you use a discount rate of 10.2%.
  
• Given the current share price of €3.1, the bearish analyst price target of €1.2 is 158.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.