The stock market has been facing some major challenges since the start of 2022 due to the recent macroeconomic headwinds, including skyrocketing inflation, a war in Europe, and the Federal Reserve’s hawkish stance to fight inflation. As a result, the major U.S. indexes were pushed into correction territory earlier in the year.
Furthermore, concerns surrounding the resurgence of COVID-19 cases and 40-year inflation rates have caused space companies to incur hefty losses and depressed revenues in the past quarters. This has led to stretched valuations of most stocks and triggered a major sell-off in space stocks. Given their weak financials and bleak growth prospects, these satellite companies are not well-positioned to withstand the current market gyrations. The bearish investor sentiment surrounding the space industry is evidenced by the ARK Space Exploration & Innovation ETF’s (ARKX) 12.6% decline over the past year.
Given the backdrop, we think overvalued satellite stocks Globalstar, Inc. (GSAT) and AST SpaceMobile, Inc. (ASTS) are best avoided.
Globalstar, Inc. (GSAT)
GSAT offers mobile satellite services worldwide. The Covington, La., company provides voice and data products and fixed voice and data satellite communications services and equipment. In addition, GSAT offers SPOT consumer retail products, commercial Internet of Things (IoT) transmission products, and engineering services. The company serves recreation and personal, government, oil and gas, construction, and transportation markets.
In its fiscal 2021 fourth quarter, ended Dec. 31,2021, GSAT's total operating expenses increased 3.6% year-over-year to $49.99 million. The company’s loss from operations grew 3% year-over-year to $15.52 million. GSAT’s loss before income taxes and net loss came in at $24.57 million and $23.96 million, respectively, registering increases of 15.7% and 10.2% from the prior-year period. The company’s loss per common share amounted to $0.01.
GSAT is relatively overvalued compared to its peers. In terms of forward EV/Sales, GSAT is currently trading at 23.23x, which is 941.1% higher than the 2.23x industry average. Its 79.68 forward EV/EBITDA multiple is 754.4% higher than the 9.33x industry average. And its forward 21.18 Price/ Sales ratio compares with the 1.56 industry average.
Analysts expect GSAT's loss per share to amount to $0.01 for its fiscal 2022 first quarter, ended March 31, 2022.
The stock has declined 12% in price over the past six months. GSAT closed yesterday's trading session at $1.47.
GSAT's POWR Ratings are consistent with this bleak outlook. The company has an overall rating of D, which translates to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
GSAT has a grade of F for Value. Within the F-rated Telecom - Domestic industry, it is ranked #15 of 19 stocks.
To see GSAT's POWR Rating for Growth, Quality, Stability, Sentiment, and Momentum, click here.
AST SpaceMobile, Inc. (ASTS)
ASTS in Midland, Tex., operates a space-based cellular broadband network accessible by standard mobile phones. The company’s SpaceMobile service provides mobile broadband services for users traveling in and out of areas without terrestrial mobile services (land, sea, or flight). Its service offering is backed by an Internet Protocol (IP) portfolio and addresses the global mobile wireless services market.
On March 9, ASTS entered a multi-launch agreement with SpaceX, including the planned summer launch of BW3, the launch of the first BlueBird satellite, and providing the framework for future launches. ASTS has paid $22.75 million in connection with these future launches. But it is expected to take some time to realize gains from these future projects.
ASTS's total operating expenses increased 190.6% year-over-year to $31.26 million in its fiscal 2021 fourth quarter, ended Dec. 31, 2021. Its loss before income tax expense grew 49% year-over-year to $12.55 million. And the company’s net loss attributable to common stockholders and net loss per share amounted to $3.11 million and $0.06, respectively.
ASTS is trading at a premium to its peers. In terms of forward EV/Sales, ASTS is currently trading at 47.91x, which is 2,047.4% higher than the 2.33x industry average. Its 56.12 forward Price/Sales multiple is 3,492.4% higher than the 1.56x industry average.
The $11.70 billion consensus revenue estimate for its fiscal year 2022, ending Dec. 31, 2022, represents an 81.1% decline from the last year. The negative $0.67 consensus EPS estimate for the current year represents an 81.1% year-over-year decline.
ASTS decreased 14.3% in price over the past year and closed yesterday's trading session at $9.98.
ASTS' POWR Ratings reflect this bleak outlook. It has an overall rating of F, which translates to Strong Sell in our POWR Ratings system.
ASTS has an F grade for Stability and Quality and a D grade for Value and Sentiment. It is ranked #19 of 19 stocks in the F-rated Telecom - Domestic industry.
Click here to see ASTS' POWR Rating for Growth and Momentum.
GSAT shares were trading at $1.47 per share on Friday afternoon, down $0.00 (-0.34%). Year-to-date, GSAT has gained 26.72%, versus a -4.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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