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Globalstar: After Shining Briefly, Still Shows Hope
Stock Analysis & Ideas

Globalstar: After Shining Briefly, Still Shows Hope

Globalstar (GSAT) is a global satellite communications company serving in more than 120 countries. The company offers customizable satellite IoT solutions for customers.

Recently, the company was thrust into the limelight after speculations about a possible partnership with Apple (AAPL). (See Globalstar stock chart on TipRanks) This writer is bearish on the stock.

Possibility of “Out-of-the-World” Apple-Globalstar Partnership

On August 29, Bloomberg reported that the upcoming model of Apple’s iPhones (iPhone 13) will support mobile calls beyond cellular networks. This led to overenthusiasm among investors of satellite stocks, sending the stocks hurtling into space almost as soon as the news was released.

Moreover, TF International Securities analyst Ming-Chi Kuo, who is known for pulling inside information from Apple’s Asian supply chain, made a guess (or is it a reveal?) that Apple might partner with Qualcomm (QCOM) for its chips and Globalstar for its spectrum, to make the sensational iPhone a possibility.

Despite not always being correct, Ming-Chi Kuo has become a reliable source for accurate predictions about upcoming Apple products. Therefore, after the speculation came from him, shares of Globalstar went on an upward spiral, soaring 64% at the end of the trading session on August 30. Investors possibly anticipated the new iPhone to eliminate the need for a strong network.

Bursting of the Bubble

Globalstar’s 5-minutes of fame was over yesterday, August 31, when Bloomberg came up with a fresh report that the satellite-level communication in the iPhone 13 is reserved for emergencies, like car crashes or reaching a person stranded in an area outside of network coverage. This poured cold water on the initial enthusiasm regarding satellite stocks, especially Globalstar, which closed 15% lower yesterday.

While the new characteristic of the iPhone is very beneficial for Apple, it doesn’t seem to be a big deal for Globalstar with regard to generating new revenue streams from Apple, even if the partnership does materialize.

Competition Looms Large

Let us not forget that the talk of the Apple-Globalstar partnership is only hearsay. A strong rival to Globalstar, AST SpaceMobile (ASTS), is gaining popularity for its powerful expertise in developing cellphones-to-satellites networks. We should not leave out the possibility of AST SpaceMobile taking away the deal with Apple.

Also, although Bloomberg’s report indicated that a major competitor of Globalstar, Iridium Communications (IRDM), will not be partnering with Apple on the iPhone 13 project, the competitive strength of the company should not be ignored. Notably, Irridium’s mission-critical services across various industries have kept its business afloat during headwinds. Additionally, the company continues to benefit from recurring service revenues, fueled by strong subscriber growth.

Prospects Remain Hopeful for Globalstar

However, the future holds positive possibilities for the company. Globalstar is currently focusing on monetizing its S-Band spectrum assets and making the most of the private LTE partnerships with the likes of Nokia (NOK), which are prudent moves to drive growth.

A couple of months ago, Morgan Stanley analyst Simon Flannery had expressed optimism for Globalstar’s prospects, despite reiterating a Sell rating on the stock, with a price target of $0.55. He had said, “Despite pressures in the early part of the year management seems optimistic that trends will continue to improve notably in the Commercial IoT segment.”

The consensus rating for Globalstar is a Moderate Sell based on 1 Sell, rated by Flannery. The average Globalstar price target of $0.55 implies 72.4% downside potential from current levels.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

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