NN: Terrestrial 5G PNT Progress Will Drive Future Upside Potential

Analysts have trimmed their average price target on NextNav from $39.50 to about $33.67, citing updated assumptions around fair value, discount rate, revenue growth, profit margins, and a very high future P/E multiple.

What’s in the News for NextNav

• NextNav announced an agreement with Safran Electronics & Defense to integrate and test interoperability between NextNav's terrestrial 5G Positioning, Navigation, and Timing network in Santa Clara County, California, and Safran's timing and navigation receiver. Source: company client announcement.
• The Safran collaboration is focused on assessing how terrestrial 5G powered 3D PNT signals can complement GPS and other GNSS technologies for drones, autonomous systems, critical infrastructure, and public safety operations. Source: company client announcement.
• NextNav reported real world field validation of timing accuracy of approximately 20 nanoseconds using Positioning Reference Signals from its operational 5G PNT network in Santa Clara County, including tests in GPS denied environments. Source: product related announcement.
• The timing performance from NextNav's 5G PNT network was reported as exceeding the 100 nanosecond requirement for critical infrastructure applications and meeting international timing standards such as ITU PRTC Telecom Mask B. Source: product related announcement.
• NextNav joined GSMA and industry partners in an industry first call to action on using mobile networks and programmable capabilities to support safe and scalable drone airspace, including secure positioning and resilient multi layer connectivity for low altitude aviation. Source: GSMA Fusion Joint Requirements Statement client announcement.

Valuation Changes for NextNav

• Fair Value moved from $39.50 to about $33.67, which is a moderate reduction in the assessed value per share for NextNav.
• Discount Rate edged down slightly from 8.86% to about 8.79%, indicating only a small adjustment to the required return used in the model.
• Revenue Growth expectations shifted from a decline of 11.58% to a slightly smaller decline of about 11.51%, reflecting a marginally less negative outlook for revenue trends in the forecast.
• Net Profit Margin moved from 12.11% to about 12.05%, which is a very small downward adjustment in projected profitability.
• Future P/E multiple estimate was reduced from a very large 22,063.73x to about 18,816.35x, which still implies a very high valuation multiple being used in the model.