Iridium is the IBD Stock Of The Day as shares forge a flat base and find support at the 10-week moving average line. Speculation over Iridium's push into satellite-based smartphone services has kindled investor interest in the stock.
On the stock market today, IRDM rose 0.8% to close at 50.92. IRDM stock has advanced 23% in 2022, bucking a bear market. Shares generally trade in low volume.
The stock's current buy point is 53.71, but Iridium stock could form a new entry point if it rebounds off the 10-week moving average. Flat bases are one kind of chart pattern to watch.
Longtime investors may recall the 1999 bankruptcy of Iridium's predecessor company. It focused on wireless phone services in remote locations.
A private holding company bought the assets of Iridium LLC for $25 million in 2001. Then, a reborn Iridium Communications went public in 2008 through a merger with GHL Acquisition.
IRDM Stock: Wholesale Data Services
Iridium sells wholesale data services. While the U.S. government is its biggest customer, Iridium says it has almost 2 million subscribers in aviation, maritime and other industries.
In addition, some 23 years after Iridium's processor fell into bankruptcy, satellite-based smartphone services remain a hot topic.
Recent announcements from Apple and T-Mobile US involve text-based services targeting ultra-rural and sparse dead-zone areas with no cellphone service. Apple has partnered with Globalstar while T-Mobile tapped Elon Musk's SpaceX and its Starlink satellite constellation.
In late July, Iridium said it had entered into a development agreement with an unnamed company. But according to a report in November, Iridium is partnering with South Korea-based electronics giant Samsung for satellite-based smartphone services.
Growth In Free Cash Flow
In the September quarter, earnings per share for IRDM stock rose 200% to 2 cents while revenue climbed 14% to $175 million.
Raymond James analyst Frank Louthan is bullish on Iridium's ability to generate free cash flow.
"After a decade-long satellite construction and launch process, Iridium is now very well positioned to achieve a long runway of revenue and EBITDA growth, which should translate strongly into free cash flow given the capex holiday," Louthan said in a recent note to clients.
He added: "As such, investor attention is now primarily focused on how the company will use the cash, including possible small tuck-in (acquisitions) or shareholder returns (stock buybacks or eventually dividends)."
Meanwhile, the Relative Strength Rating of IRDM stock is 95 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
The company holds an IBD Composite Rating of 82. The best growth stocks have a Composite Rating of 90 or better.
IRDM Stock: Samsung Partnership In The Cards?
Iridium stock owns an Accumulation/Distribution Rating of B-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
Analysts have not yet built satellite-based smartphone services into financial targets.
According to reports, Iridium will support services to Samsung's Galaxy S23 smartphone family. Many expect it to launch during the first week of February 2023.
Morgan Stanley analyst Landon Park holds an upbeat view of IRDM stock.
"The focus for investors moving forward will be on confirmation of the company's service provider agreement and any details regarding potential revenue sizing," Park said in his note to clients. "With 2022 estimated service revenue of $535 million and free cash flow of $266 million, we expect smartphone connectivity to be materially accretive to Iridium's growth rate and cash flow generation in the coming years."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
