UPDATE: B.Riley Starts Globalstar (GSAT) at Buy, Says Poised to Monetize Spectrum of Opportunities
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B.Riley analyst Mike Crawford initiates coverage on Globalstar (NYSE: GSAT) with a Buy rating and a price target of $3.25.
THe analyst comments "We believe Globalstar and its sponsors, after years of development, support, and patience, are at long last starting to realize a return on satellite system and spectrum assets, making 2021 an excellent time, in our opinion, to buy GSAT before the market digests this change. We believe many investors perceive GSAT as a long-suffering, over-leveraged mobile satellite services (MSS) provider with spectrum assets that have been difficult to monetize. In contrast, our investment thesis is that Globalstar has moved through the high-risk portion of its history and is now poised to start generating returns on its hard-fought terrestrial spectrum authorization, primarily including 11.5 MHz of 2.4 GHz S-Band spectrum in the U.S., as well as 16.5 MHz of 2.4 MHz international spectrum with no power limitations. GSAT also operates a sunk-cost MSS business that is generating positive operating cash flow, which we believe actually bottomed in 1Q21. As such, we see Globalstar’s low-data-rate satellite business returning to growth, with cash flow further bolstered by domestic and international spectrum monetization agreements—and with GSAT’s first $1.8B of profitability sheltered by a massive NOL that is hidden on the balance sheet by a $381M deferred tax asset valuation allowance. These aforementioned assets alone more than cover the debt and equity at current levels, in our opinion, plus GSAT has a powerful, low-theta option in the form of some 59 MHz of 5.1 GHz C-Band spectrum—representing nearly 20B MHz-POPs—as well as 8.7 MHz of 1.6 GHz LBand spectrum that the company could monetize down the road, as well. At the high end, we estimate that this C-Band spectrum alone could be worth some $15B. For now, based on a midcase sum-of-the-parts analysis of GSAT’s terrestrial spectrum, MSS, and tax assets, we arrive at a targeted $4.5B EV and a $2.35 stock price. Plus, we factor in just a 15% value realization probability to GSAT’s C-Band and L-Band spectrum, at the midpoint adding ~$0.90/share to our inaugural SOTP, to constitute our $3.25/share PT."
Shares of Globalstar closed at $1.29 yesterday.
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