Global Satellite Internet Network Could Be A Game-Changer… Here's How To Profit From It
In a report published Wednesday, Macquarie Research analyst Andrew DeGasperi discussed OneWeb's recent announcement that it has secured $500 million in funding for a network of small satellites that could connect the "other three billion" people to the Internet.
OneWeb has four years to develop and launch 650 satellites before the expiration of the ITU spectrum rights in 2019. At the same time, the costs involved "are a big question mark." Nevertheless, if successful, OneWeb could have a "disruptive" impact to the satellite industry.
DeGasperi highlighted the impact to companies under his coverage.
Echostar Stands To Benefit The Most
Echostar Corporation (NASDAQ: SATS) stands to benefit the most, according to DeGasperi. The analyst noted that the company likely invested $40 million to $60 million and stands to win by "inexpensively hedging itself from what could be a very disruptive event with potential huge upside."
The analyst also added that the company is likely to more than cover its investment by "several orders of magnitude" with engineering work and by developing gateway and consumer terminals.
Shares are Outperform rated with a $60 price target.
Iridium Communications: No Significant Impact
Unlike Echostar, DeGasperi isn't expecting Iridium Communications Inc (NASDAQ: IRDM) to see any "significant" impact as its end markets are very niche and mainly focus on the higher-end satellite handsets, maritime, M2M and government applications.
Shares are Outperform rated with a $12 price target.
ViaSat: Faces Stiff Competition
Finally, DeGasperi stated that ViaSat, Inc. (NASDAQ: VSAT) would likely face competition from a combined Echostar/OneWeb on its footprint. However, the company's "strong ties" to government and commercial partners are unlikely to be affected.
Shares are Neutral rated with a $60 price target.
DeGasperi stated that he is "somewhat skeptical" of the project, given the current lack of details, previous failures and Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and Facebook Inc (NASDAQ: FB) scrapping similar plans.
"We think the feasibility of the project was likely too ambitious even for Google's ‘Moon Shoot' mentality," the analyst concluded.
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