Globalstar's Portfolio Has Potential, But Monetization Is Key, Morgan Stanley Says

The significant discounted valuation the markets have ascribed to Globalstar, Inc. (NYSE:GSAT)'s 11.5 MHz of 24-GHz spectrum relative to recent auction/spectrum transactions is warranted, according to Morgan Stanley.

The Analyst

Analyst Simon Flannery initiated coverage of Globalstar with an Equal-weight rating and a 70-cent price target.

The Thesis

The discounted valuation of the spectrum assets is due to the higher frequency of Globalstar's spectrum; possible interference issues in the 2.4-GHz band; and an unclear monetization path, Flannery said in a Wednesday note.

The monetization of Globalstar's portfolio has the potential to unlock significant value, but progress has been slow, the analyst said.

"The stock has been under pressure in recent months, however, as initial efforts to monetize the U.S. spectrum did not succeed, despite the bidding war for microwave spectrum owner Straight Path," Flannery said.

Globalstar is highly levered, with significant near-term funding needs, according to Morgan Stanley.

The mobile satellite services business has performed well recently, showing 24-percent year-over-year growth in the most recent quarter, Flannery said — but this business accounts for only 20 percent of the value in Morgan Stanley's sum-of-the-parts framework.

Nevertheless, Morgan Stanley sees the spectrum assets and the MSS as key value drivers. Globalstar's potential catalysts are spectrum monetization, spectrum auctions and balance sheet activity, the analyst said.