IoT Expansion And 5G Adoption Will Ignite Global Communications

Key Takeaways

• New government and industrial partnerships, coupled with rapid IoT adoption, position Globalstar for substantial service revenue and margin growth beyond current expectations.
  
• Unique global spectrum assets and infrastructure investments enable premium market positioning and diversification, fueling premium monetization and compounding cash flow opportunities.
  
• Intensifying competition, regulatory pressures, high capital spending, revenue concentration risk, and disruptive new entrants threaten Globalstar's long-term growth, profitability, and relevance.

Catalysts

Provides mobile satellite services in the United States, Canada, Europe, Central and South America, and internationally.

• Analysts broadly agree that new government and defense partnerships, such as with Parsons and U.S. federal agencies, will increase recurring revenues, but this likely understates the step-change potential in government spending as critical infrastructure concerns and disaster response accelerate annual contract values, creating upside for both service revenue growth and long-term margin expansion.
  
• Analyst consensus expects RM200 2-way module adoption to drive incremental IoT subscriber growth, but current testing across 50+ partners and rapid proof-of-concept progress suggest adoption could move far faster than expected, enabling Globalstar to capture disproportionate market share in critical industrial and defense IoT, materially boosting average revenue per user and net operating cash flow.
  
• Globalstar's globally harmonized and licensed spectrum positions it not just as a service provider, but as a gatekeeper for international terrestrial and hybrid wireless markets; as more nations and private network operators race to deploy private 5G and resilient coverage, Globalstar could monetize its spectrum at a premium-supporting structurally higher licensing revenues and delivering significantly stronger free cash flow.
  
• The increasing expectation for seamless connectivity and the sharp rise in IoT device proliferation are converging, and Globalstar's focused investments in global ground and space infrastructure place it at the epicenter of this demand wave, amplifying its addressable market and potentially unlocking compounding subscriber and service revenue growth as ubiquitous asset tracking and always-on communication become industry standards.
  
• Ongoing investment in XCOM RAN and advances in software-defined radio technology may not only drive high-margin, differentiated solutions for Globalstar's customers, but also unlock lucrative Network-as-a-Service opportunities and cross-vertical licensing in both satellite and terrestrial connectivity, elevating gross and EBITDA margins further as network convergence intensifies.

Globalstar Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Globalstar compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Globalstar's revenue will grow by 16.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -18.8% today to 24.9% in 3 years time.
• The bullish analysts expect earnings to reach $102.5 million (and earnings per share of $0.66) by about September 2028, up from $-49.0 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 bullish analyst cohort, the company would need to trade at a PE ratio of 91.2x on those 2028 earnings, up from -95.4x today. This future PE is greater than the current PE for the US Telecom industry at 15.2x.
• Analysts expect the number of shares outstanding to grow by 0.41% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Globalstar Future Earnings Per Share Growth

Risks

• Globalstar faces intensifying competition from terrestrial wireless networks such as 5G and the coming 6G, as well as from rapidly evolving fiber infrastructure, which may erode the long-term relevance and revenue potential of its satellite-based connectivity offerings.
  
• There is an ongoing risk that mounting regulatory scrutiny and the global push to reallocate spectrum for terrestrial uses could threaten the value of Globalstar's spectrum assets and restrict the company's ability to expand, ultimately putting downward pressure on topline growth.
  
• The company's substantial investments in network expansion, ground infrastructure, and product development-including the costly build-out of ground stations and new satellite launches-raise the likelihood that ongoing capital expenditures will outpace revenue growth, limiting free cash flow and compressing net margins over time.
  
• Globalstar's business relies increasingly on large, concentrated contracts with a few key partners and government agencies, exposing the company to significant earnings volatility and risk of revenue disruption if any major contract is lost or fails to materialize as expected.
  
• Rapid innovation and scaled entry by mega-constellation competitors such as Starlink or Kuiper could drive down service pricing and attract customers away, putting pressure on Globalstar's revenue base and making it difficult to maintain or improve profitability as industry ARPU declines.

Valuation

• The assumed bullish price target for Globalstar is $60.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Globalstar's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $45.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $412.1 million, earnings will come to $102.5 million, and it would be trading on a PE ratio of 91.2x, assuming you use a discount rate of 6.8%.
• Given the current share price of $36.91, the bullish analyst price target of $60.0 is 38.5% higher.
• 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.