VSAT: Increased Competition Will Likely Limit Benefits From Spectrum Holdings

Key Takeaways

• Expanding secure connectivity and advanced satellite networks positions Viasat for broader market access, higher pricing power, and sustained top-line growth.
  
• Strategic integration, operational efficiency, and heightened demand for digital inclusion support improved cash flow, reduced debt, and better earnings quality.
  
• Mounting costs, subscriber declines, increased competition, and regulatory pressures threaten Viasat's margins, growth prospects, and ability to generate positive cash flow.

Catalysts

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

• Viasat is poised to benefit from growing global demand for secure connectivity and resilient communications, driven by heightened geopolitical instability and increased threats to network and data center security-which is fueling double-digit growth in its Defense and Advanced Technologies segment and should drive sustained revenue expansion.
  
• Accelerating rollout of the ViaSat-3 global satellite constellation will substantially increase total bandwidth and coverage, opening up new customer segments and enabling service launches (notably in-flight, maritime, and rural fixed broadband), providing a pathway for higher ARPU and a stronger top-line growth trajectory.
  
• Industry demand for interoperable hybrid satellite/terrestrial networks and open architecture (such as 5G NTN roaming) positions Viasat to leverage its spectrum assets and expertise in aggregating multi-orbit networks, potentially lowering capital intensity, expanding the customer base, and improving margin structure.
  
• The focus on operational efficiency, portfolio review, and progressing integration with Inmarsat-in addition to CapEx peaking with the ViaSat-3 program-sets up Viasat for positive free cash flow inflection, deleveraging, and earnings improvement as major investment cycles wind down.
  
• Rising government and commercial interest in bridging the digital divide, especially in underserved and remote areas, provides a multi-year tailwind through subsidy programs and public/private contracts, supporting stable, recurring revenue streams and margin visibility.

Viasat Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Viasat's revenue will grow by 2.9% annually over the next 3 years.
• 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 10.7% in 3 years.
• If Viasat's profit margin were to converge on the industry average, you could expect earnings to reach $534.2 million (and earnings per share of $3.66) by about August 2028, up from $-598.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.4x on those 2028 earnings, up from -5.9x today. This future PE is lower than the current PE for the US Communications industry at 25.6x.
• 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

• Significant ongoing and planned capital expenditures, including approximately $1.2 billion this year for ViaSat-3 and Inmarsat, continue to pressure the company's leverage and risk straining free cash flow and net earnings in the near and medium term.
  
• Declining U.S. fixed broadband subscribers (down 13% year-over-year with continued declines cited) highlight exposure to rapid advancements in terrestrial broadband (fiber, 5G/6G), which could further erode Viasat's addressable market and threaten long-term revenue growth.
  
• Heavy reliance on large capital projects (e.g., ViaSat-3 launches) introduces operational and schedule risks, with any delays or technical issues resulting in increased depreciation, amortization, and the risk of further cash outflows, impacting net margins and earning power.
  
• Rising legal, compliance, and regulatory costs-including ongoing litigation and future obligations related to spectrum allocation, orbital debris, or environmental scrutiny-have resulted in elevated operating expenses this quarter and could depress margins as regulatory pressures increase.
  
• Intensifying industry competition from well-capitalized players (SpaceX/Starlink, Amazon/Project Kuiper, OneWeb) threatens market share in core aviation, maritime, and direct-to-device markets, potentially leading to price pressure, slower backlog growth, and reduced profitability over the long term.

Valuation

• The analysts have a consensus price target of $24.286 for Viasat based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be $5.0 billion, earnings will come to $534.2 million, and it would be trading on a PE ratio of 9.4x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $26.22, the analyst price target of $24.29 is 8.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.