One penny stock capturing attention in telecommunications infrastructure is Globalstar (NYSE:GSAT). The company’s strategic partnership with Apple (NASDAQ:AAPL) is set to expand the iPhone’s satellite messaging capabilities with its latest iOS18 update. As a result, GSAT shares have seen increased interest from giant investors, including Jim Simons’ Renaissance Technologies and Israel Englander’s Millennium Management.
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However, the largest shareholder is GSAT Director James Monroe. He recently purchased a significant stake in the company, adding 4.51 million shares to his portfolio (strong insider buying is a very bullish indicator).
Trading in the $1.20 range, small moves in price can amount to outsized volatility, so investors should be prepared for a bumpy ride. Still, the stock appears to hold high-risk, high-reward potential for those brave enough to add it as a portfolio holding.
What Investors Should Know About Globalstar
Globalstar provides mobile satellite services globally, including regions such as the United States, Canada, Europe, and Central and South America. The company’s network now includes 24 low-Earth-orbit satellites, with plans to add 17 more satellites to the constellation in 2025 to improve coverage and performance.
Globalstar offers the core satellite connectivity for iPhones, and Apple has indicated it plans to expand satellite connectivity to regular text communications in regions beyond cellular reach. This feature, which has been somewhat overlooked, will be available with the iOS 18 software release and could be a decisive factor in consumer decisions to upgrade their devices.
Apple’s satellite function, previously limited to iPhone 14 and 15 emergency services, has been tested successfully in cellular dead zones. There are also suggestions that this limited connectivity could be sold to apps willing to pay for it, further driving Apple’s (and potentially Globalstar’s) revenue growth.
Analysis of Globalstar’s Recent Financial Results
The company recently reported results for Q1 2024. Reported revenue of $56.48 million beat analysts’ estimates of $54.74 million and experienced a $0.5 million year-over-year increase. After omitting nonrecurring revenue recorded in the previous year, the service revenue increase was $3.7 million, or 7%. A newly executed agreement with a government services company increased Commercial IoT sector services, and a swell in the subscriber base has contributed to this revenue growth. However, this was offset by shrinking legacy service revenues and a $2.7 million decline in equipment sales revenue.
The company’s operating loss for Q1 2024 stood at $4.7 million, a sharp contrast to the -$7.2 million income from operations recorded in Q1 2023. Globalstar reported a net loss of $13.2 million for Q1 2024, up from a loss of -$3.5 million in Q1 2023, primarily due to higher operating expenses and the aforementioned decrease in equipment revenue.
Adjusted EBITDA for the quarter stood at $29.6 million, a decline from the prior year, primarily owing to lower equipment revenue. Recorded earnings per share of -$0.01, slightly missed consensus expectations of $0.
Management has issued guidance for the year 2024. The total revenue is expected to range from $225 million to $250 million. In addition, the company has estimated an adjusted EBITDA margin of around 50%.
What Is the Price Target for GSAT Stock?
The stock is highly volatile and subject to runs. It is up 17% over one year despite the price doubling in January and surrendering most of that gain by July. The shares trade at the lower end of the 52-week price range of $1.01 – $2.13 and demonstrate positive price momentum, trading above the 20-day (1.15) and 50-day (1.18) moving averages.
Wall Street follows the company thinly, though the analysts covering it have been bullish on the stock. For instance, Craig-Hallum analyst George Sutton, a five-star analyst according to Tipranks ratings, recently set a price target on GSAT stock of $4, representing a potential upside of 214.96% from current levels.
GSAT in Summary
Globalstar’s satellite network expansion and diversity in products and services have delivered first-quarter revenues exceeding estimates and an optimistic outlook for the remainder of 2024, making it a potentially high-risk, high-reward opportunity for investors. With increased interest from notable investors and the potential of increased revenue from partnerships with major tech companies like Apple, GSAT is a compelling penny stock option for those willing to weather potential volatility.
