A U.K research firm called Pixalytics put out an interesting article late last year which talks about the number of working satellites orbiting the earth (1,738), a number that is dwarfed by the number of satellites in space that are not working (2,897). Imagine trying to collect all those broken satellites that are screaming around our planet at 17,500 miles an hour. Better just to forget about all that space rubbish for now and launch a isht load more of them, which is exactly what’s happening. By November of 2017, the United Nations Office for Outer Space Affairs (UNOOSA) had recorded 357 objects launched into space in 2017 which is almost 50% more than have ever previously occurred in a single year. For investors, you can take two paths here. The first path is one of hand-wringing and outrage followed by tweetstorms of indignation, while the second path involves getting on the capitalist train before it leaves for money town. Choo-choo!
Source: SES Investor Deck
Our last article on investing in the space industry by buying “space stocks” showed just what a bad idea it is to take any advice from all those MBAs at Morgan Stanley about buying shares of Apple to “invest in space“. The better idea is to listen to our MBAs who may be paid a lot less, but don’t have a list of clients that they need to appease. We present you with our list of 10 satellite stocks involved in various aspects of satellite production, operation, and services. The first is space technology company Maxar Technologies (NYSE:MAXR) which we touched on in our last article on this topic. The remaining 10 satellite stocks are as follows.
Luxembourg company SES (EPA:SESG) operates 62 satellites with around 68% of their revenues coming from video which is streamed over +7.400 television channels. (Television is kind of like Youtube but much more limited). With customers in 130 different countries and coverage over 99.99% of the globe, you’d be surprised to see that this $7 billion company is worth a lot less after their share price cratered nearly -40% last year. The share price decline seems to have started in June of last year when the company lost almost a third of their transponders in an anomaly which marked their second major satellite malfunction in 2017. While we might be inclined to think traditional television is on a decline, they don’t:
Source: SES Investor Deck
If you buy that and want to get on board with the “world’s leading satellite-enabled solutions provider“, now may be the time to start accumulating a position as shares bounce off of their 52-week lows.
Our next company, IntelSat (NYSE:I), also hails from Luxembourg and provides “the world’s most extensive and secure communications network” via the 50 or so satellites they have in operation. The usual suspects are on offer here including connectivity, multi-format video broadcasting, secure satellite communications and seamless mobility services. Here is a breakdown of revenues from this $408 million company:
IntelSet Revenues Breakdowns for Q3-2017 – Source: IntelSat
This past October, IntelSat teamed up with Intel to urge the FCC to allow territorial communication companies to utilize satellite-controlled C-band spectrum for future 5g networks on satellite industry terms. Past performance is not indicative of future performance and all that, but shares of IntelSat have managed to lose -93% of their value in the past 5 years. Maybe it’s the $14 billion of debt on their books, or maybe it’s the failed merger with OneWeb that Softbank was trying to engineer, but this stock appears to be going nowhere fast at the moment.
With a market cap of around $5.27 billion, French company Eutelsat (EPA:ETL) describes themselves in much the same way as the other companies we’ve discussed so far. With 39 satellites in orbit, they’re also driving a significant portion of their revenues from video by broadcasting over 6,600 channels:
Source: Eutelsat
Their latest investor presentation talks about the high barriers to entry in this business, slow sustained growth for video in emerging markets, and pretty much stale growth in other areas like fixed data and government services. On the other hand, they also talk about strong future growth in areas like high-definition television and mobile bandwidth usage. Let’s hope these trends come to fruition, because investors must be getting frustrated. You would have lost -26% holding shares of ETL over the past 5 years, which would have significantly underperformed the NASDAQ return of +141% over the same time frame.
With a market cap of $4.31 billion, ViaSat (NASDAQ:VSAT) is a 30-year-old company that has been “engaged in broadband technologies and services” which are provided from their small network of satellites that represent $1.16 billion of assets on their balance sheet. In 2013 they purchased their ViaSat-2 satellite from Boeing for $358 million and now have plans to purchase an additional two “ViaSat-3” satellites from Boeing which will provide broadband across the globe in 2019. Their business model appears to be buying satellites from Boeing and using them to generate revenues from the following channels that we have overly simplified for you:
- Government systems (48%) – Global mobile broadband services and products to military and government users
- Satellite services (37%) – Broadband to consumers, enterprises, commercial airlines and mobile customers
- Commercial networks (15%) – Broadband platforms, ground networking equipment, space-to-earth connectivity systems
If you’re willing to pony up the exorbitant fees for in-flight WiFi on your next business trip, that was probably made possible by ViaSat. With a 5-year stock price return of +86%, they’ve also not managed to outperform the NASDAQ. You can read more about their lofty ambitions in our past article on Global Internet to Keep Us Connected Everywhere.
With a market cap of around $3 billion, London based Inmarsat (LON:ISAT) owns and operates a total of 13 spacecraft flying in geostationary orbit 22,236 miles above the Earth. The company is best known for launching the world’s first global mobile satellite communications system to enable merchant ships to stay in touch or call for help in an emergency, a service that makes up about 40% of their total revenues. Inmarsat also caters to customers who require communication in places wherein telecom networks are unreliable or simply unreachable like governments, airlines, broadcast media, the oil and gas industry, mining, construction and humanitarian aid agencies. They’ve managed to lose -34% of their share price value in the past year so it might be worth wading through this incredibly rich investor presentation we found from 2016 to see what plans they have to “turn the ship around” as it were.
Founded in 2007, Danish company GomSpace (FRA:1G2) started off as a simple university research project but has since emerged as a $281 million nanosatellite company that has already made one acquisition (a satellite propulsion company called NanoSpace) and has customers in 55 countries. Here’s a look at their nanosatellite product offering along with some basic growth metrics (numbers in Swedish currency):
Nanosatellite fundamentals for GomSpace
They’re working with the European Space Agency to develop advanced propulsion for nanosatellites and have literally been taking in orders for 100s of nanosatellites from various customers with test satellites already having been launched. Be sure to check out the latest GOMspace investor deck if you’d like to know more about this interesting little Danish nanosatellite company that’s doing big things. Interesting fact, apparently their satellites need to be replaced about every 5 years. Can you say recurring revenues?
You may have noticed a large proliferation of European companies in this list, and no such list would be complete without representation from zee Germans. With a market cap of just under $1 billion, German space technology company OHB (ETR:OHB) derives a majority of their revenues from the development and manufacturing of low earth orbit and geostationary orbit satellites for navigation, scientific, communication and earth observation purposes. The stock has seen some interesting price action having soared +149% in the past year. They’re the third largest “large system integrator” in Europe (Airbus, Thales, and OHB) and claim to be the only pure-play “space company” in Europe (just don’t tell GOMspace that). You can check out the latest investor deck for OHB at this link.
With a market cap of $1.1 billion, Iridium Communications (NASDAQ:IRDM) claims to be “the only satellite communications company that offers truly global voice and data communications coverage“, something made possible by their 66 low-Earth orbiting (LEO) cross-linked satellites – the world’s largest commercial constellation – which operates as a fully meshed network providing 100% global coverage. The U.S. government is their largest single customer accounting for 25% of total revenues. (The United States government is actually the largest single consumer of fixed satellite services in the world.) Iridium now has over 850,000 subscribers, a number that has been consistently growing over the years:
Revenue and Subscriber Growth – Source: Iridium Communications
Even in the face of such growth, share price performance has been lackluster returning just +75% over the past 5 years. Maybe you can tuck into their latest annual report and try to figure out why that is because it’s not so obvious to us.
If you’re looking for a micro-cap play on the satellite theme, look no further than Avanti Communications (LON:AVN), a U.K. company that must be taking lessons from Intelsat. Shares of Avanti have managed to lose -96% of their value over the past 5 years giving the company a present-day market cap of just $17.6 million. That’s after they invested $1.2 billion to build a network of 5 satellites that apparently haven’t shown a decent ROI. 2017 revenues came in at $56 million (versus $82.8 million in 2016), debt fell to $562 million, and the CEO stepped down. Here’s the entire annual report if you’re interested.
Last but not least is Loral Space & Communications (NASDAQ:LORL), a nearly $1 billion company that owns 62.7% of Telesat, a Canadian venture that is one of the world’s largest providers of satellite services with 15 satellites. This also checks out according to Wikipedia’s list of the world’s largest fixed service satellite operators in the world which lists Telsat in 4th place. Loral appears to be just a holding company for Telesat shares, so we can look at Telsat’s revenues and see that just over 50% come from broadcasting alone, with 45% coming from enterprise services (government, consumer broadband, maritime, etc.). Here’s their last annual report that doubles as a sleep aid.
As we wrap up this article, it’s worth noting that this is not a comprehensive list of all satellite stocks, but rather a sampling of companies who own some of the many satellites that orbit our planet. We came across a few additional names of interest that we’re saving for future articles on this topic. One, in particular, is a play on IoT and has actually managed to beat the NASDAQ over the past 5 years with a return of +183%. Stay tuned.
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