EchoStar and Viasat revised down by bank
January 19, 2021
Viasat, the California-based international broadband-by-satellite supplier, and Charlie Ergen’s EchoStar satellite business have both suffered a downgrade by analysts at investment bank Jefferies.
In essence, the bank’s report says that Viasat’s revenues are likely to be impacted by the Covid pandemic and the bank has downgraded its revenue forecasts for this trading year. The bank suggests that the decline could be in the 6-10 per cent range.
The end result is significant. Jefferies had previously estimated Viasat’s revenues for the year to be $2.434 billion. Now, with the downgrade they are estimating $2.173 billion for 2021, and a similar trimming for 2022 from $2.576 billion to $2.368 billion.
Behind the downgrade are anxieties about Viasat’s commercial prospects in Europe as well as what the bank describes as the “looming” impact of rival Low Earth Orbiting constellations.
Viasat’s share price this past 12 months has been extremely volatile (ranging between $74 and $25 per share). Jefferies suggests a Base Case price target of $42.50 (from a previous $75). Currently Viasat’s share price is in the $37-$38 range.
These days EchoStar depends considerably on revenues generated by its Hughes Network Systems subsidiary. Jefferies is downgrading its forecasts for EchoStar by about 25 per cent to “reflect the impact of the pandemic YTD and the divestment of the broadcast business to Dish.”
In summary, Jefferies have adjusted their estimated forecasts for EchoStar for 2020 from $2.546 billion to $1.866 billion. Their 2021 estimated forecasts stay in the same ballpark at $1.846 billion. EBITDA expectations for 2020 are reduced by about 35 per cent.
Jefferies says they have concerns over EchoStar’s commercial momentum in its International markets, and worries about the impact of competition from their emerging Low Earth Orbiting rivals. Jefferies also says it is uncertain about EchoStar’s S-band strategy.
It has issued its ‘base case’ price target of just $28 per share (from $69.50). EchoStar’s price range over the past 12 months have been between $43.71 – $19.75).