JPMorgan Upgrades Intelsat, Says Investors Overreacted To C-Band Spectrum Sale Obstacles

Intelsat SA I shares have plunged on adverse news related to the company’s C-Band Alliance.

The recent obstacles in the path to C-Band spectrum sale are not surprising, and the market seems to be underpricing the likelihood of CBA eventually making a spectrum sale and "reaping substantial proceeds," according to JP Morgan.

The Analyst

JPMorgan’s Philip Cusick upgraded Intelsat from Neutral to Overweight with an unchanged $27 price target. 

The Thesis

Intelsat’s shares have lost 38 percent since Feb. 27, when a series of headlines triggered concerns around CBA’s momentum, Cusick said in the upgrade note. 

The market had previously seemed overly optimistic — although the threats of blockage, litigation, legislation and windfall profit taxation were always there, the analyst said. After an overly optimistic period, the market now appears to be underestimating the probability that Intelsat and the CBA will be able to sell spectrum, he said. 

Key decision makers at the FCC are still supporting CBA, and the alliance will consider different ways in which to offer C-Band spectrum to wireless carriers in the next five years, Cusick said. 

Other factors working in CBA’s favor are that 5G and spectrum availability are priorities for the administration, and carriers have a need for this spectrum for 5G in wide geographies and are willing to pay for it, according to JPMorgan. 

Price Action

Intelsat shares were up 6.97 percent at $16.42 at the time of publication Wednesday. 

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