GEO Broadband Will Suffer Amid LEO And 5G Challenges

Key Takeaways

• Mounting competition from LEO satellites and terrestrial networks is eroding Viasat's market share, pressuring subscriber growth and revenue sustainability.
  
• Heavy investment demands, operational risks, and regulatory challenges threaten cash flow, margins, and future capacity expansion.
  
• Expanded satellite capacity, defense-driven contract wins, and product innovation are fueling global growth, operational efficiencies, and improved margins through integration and industry collaboration.

Catalysts

Provides broadband and communications products and services in the United States and internationally.

• The rapid proliferation of Low-Earth Orbit (LEO) satellite constellations, such as Starlink, is expected to cause ongoing price and capacity pressure on Viasat's GEO-based broadband offerings. This structural shift will likely reduce subscriber growth and force down average revenue per user as LEO networks drive commoditization of satellite internet, directly impacting Viasat's top-line revenues and long-term earnings potential.
  
• Continued global expansion and subsidization of terrestrial fiber and 5G networks are expected to erode satellite's competitiveness in both developed and urbanizing regions, shrinking Viasat's addressable broadband market and impairing its ability to sustain revenue growth as fixed broadband subscriber numbers continue to decline.
  
• Heavy, persistent capital expenditures and high debt service requirements stemming from ongoing ViaSat-3 satellite launches and integration activities threaten to suppress free cash flow and exert downward pressure on net margins, especially as cash generation continues to lag the required investment to keep up with industry technology cycles.
  
• Viasat faces an elevated risk of market share loss in both government and commercial segments as defense customers turn to competitors with more advanced and resilient cybersecurity, bandwidth, and hybrid networking solutions, while ongoing reliability and integration risks of ViaSat-3 further undermine confidence in Viasat's service offering and recurring revenue base.
  
• Growing regulatory and environmental scrutiny around spectrum allocation, orbital debris, and power emissions may lead to restrictions or delays in future satellite deployments, capping Viasat's ability to expand capacity and scale services, thereby increasing operational risk and threatening future EBITDA growth.

Viasat Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Viasat compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Viasat's revenue will grow by 2.7% annually over the next 3 years.
• The bearish analysts are not forecasting that Viasat will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Viasat's profit margin will increase from -13.1% to the average US Communications industry of 9.3% in 3 years.
• If Viasat's profit margin were to converge on the industry average, you could expect earnings to reach $458.3 million (and earnings per share of $3.14) by about August 2028, up from $-598.5 million 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 4.5x on those 2028 earnings, up from -5.7x today. This future PE is lower than the current PE for the US Communications industry at 25.0x.
• Analysts expect the number of shares outstanding to grow by 2.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Viasat Future Earnings Per Share Growth

Risks

• Successful launch and monetization of ViaSat-3 Flights 2 and 3 will substantially expand bandwidth capacity and geographic reach, supporting recurring revenue growth and improved operating margins as capital intensity falls post-deployment.
  
• The integration of the Inmarsat acquisition continues to generate cost and revenue synergies, especially through cross-selling efforts and operational efficiency, which could drive sustainable EBITDA improvement and stronger free cash flow.
  
• Increasing defense and cybersecurity demand, bolstered by secular trends in secure communications and quantum-resistant encryption, led to a record $224 million in infosec awards this quarter, positioning Viasat to capture higher-margin, resilient government and enterprise contracts that fuel both revenue and margin expansion.
  
• The rapid adoption and scaling of new products like NexusWave in maritime and Amara in aviation are creating high-value, global service offerings that have already driven sequential growth, setting the stage for renewed top-line momentum and uplift in segment profitability.
  
• A focused strategy to build shared satellite/L-band/S-band infrastructure in collaboration with other spectrum holders and industry partners, leveraging utility-like models, has the potential to reduce capital expenditure, increase asset utilization, and support stable long-term earnings and free cash flow growth.

Valuation

• The assumed bearish price target for Viasat is $10.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Viasat'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 $52.0, and the most bearish reporting a price target of just $10.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $4.9 billion, earnings will come to $458.3 million, and it would be trading on a PE ratio of 4.5x, assuming you use a discount rate of 12.3%.
• Given the current share price of $25.62, the bearish analyst price target of $10.0 is 156.2% 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.