Last week’s disappointing Eutelsat Q1 results are still resonating with market-watchers.
Investment bank Berenberg, a close observer of satellite stocks, in a report to clients admits that Eutelsat’s numbers were “extremely disappointing” and while the bank says that its favourable ‘BUY’ position towards the Paris-based satellite operator would continue, it adds “we fully understand that investors need at least some level of top-line visibility before buying into the Eutelsat yield story.”
“That said, while acknowledging that the Q1 results did very little to help resolve the market’s structural concerns, we continue to believe that a sole focus on weak near-term revenue momentum provides an attractive entry point. Management’s emphasis on costs and cash flow means that, even in the event of a downside top-line scenario, we believe Eutelsat can continue to pay its c10 per cent shareholder return yield over the coming years,” continues Berenberg.
The bank’s note and tone towards Eutelsat couldn’t have been tougher. Phrases such as “thoroughly disappointing”; “uncomfortable”; “lacklustre” appear throughout the report and the bank chides Eutelsat for trying to positively spin a 6.2 per cent crash in overall revenues by only saying it was “slightly behind where we would like to be at this stage of the year”.
However, and anticipating (correctly) a price fall in Eutelsat stock this week, the bank advises clients that now is probably a good time to acquire Eutelsat stock, and gives the company a €20 price target saying that cost-cutting and back-end revenue improvements should still help Eutelsat’s recovery as its financial year unfolds.