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Eutelsat starts fight back

When a business has received a brutal beating and a very bloody nose from a dismayed stock market there’s not much that can be done other than to get back on one’s feet and start fighting back.

The bloody nose was given to satellite operator Eutelsat last week when the company issued a profit warning, and shocked the market by stating that previous buoyant and highly appealing expectations had turned into a negative outlook in barely 3 months.

May 17th saw equity analysts at Credit Suisse downgrade its investment advice on Eutelsat from “outperform” to “neutral”, saying that the bank’s outlook had proven to be overly optimistic. “While we still see positive growth trends in certain segments, particularly 4K TV and US government spend, we acknowledge that these trends are coming through slower than we had imagined 18 months ago,”: said the bank’s note.

“Having capacity in the right place increasingly important. Going forward exposure to different end users and the allocation of future satellite capacity to different geographies will increasingly drive our satellite stock views, rather than a one size fits all approach.”

Insiders at Eutelsat are themselves recovering from the shock of last week’s events, which saw the company hammered and hammered again as investors rushed to sell their stakes. A near-30 per cent fall on May 13th was followed by further volatility during this past few days.

But as one Eutelsat staffer said May 17th, “Now it’s time for a deep breath and start getting the message out there again.” The source suggested that the market had over-reacted, but “we are where we are” and that the fundamentals at the operator “remained strong”.

The news, it is claimed, is far from all being bad. “Our MENA position is incredibly strong and shows absolutely no sign of weakness, far from it. We also have strong trends underway everywhere where broadcasters are adopting HD TV, and even markets where life has been tough, such as Russia, are recovering. Russia’s Tricolor [pay-TV broadcaster] has 12 million subscribers.”

As the Credit Suisse report admitted, the broadcasting industry is on the cusp of adopting Ultra HD, and it is satellite that will be the beneficiaries of this shift to the higher transmission standard.

There has been little doubt that some savvy buyers took one look at the falling share price and bought in to the company. That certainly seems to have been the case on May 17th, when its share price opened at 17.97 and wrapped the day at 18.45.

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