Satellite communications company Iridium Communications (IRDM) posted Q3 results that exceeded top and bottom-line expectations, prompting a brief 19% climb in the share price. The company’s new contracts and projected continuous revenue growth signal a potentially promising future. Further, the recently announced $491.6 million contract modification with the Space Development Agency further validates their strong position in the satellite communications market.
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With these positive updates, Iridium continues solidifying its status as a potentially attractive investment option for growth-oriented investors interested in exposure to a rejuvenated space race. However, given its relative valuation, price-sensitive investors may want to hold off for now.
Iridium Communications Making Significant Progress
Iridium Communications provides mobile voice and data satellite communications services and products catering to businesses, governmental and non-governmental organizations, and consumers. Iridium’s satellite constellation is known for its reliability and is the only network that provides connectivity everywhere on Earth. They offer a wide array of services, including mobile voice satellite communications, broadband data, push-to-talk, and IoT services.
Additionally, they provide hosted payload and other data services, as well as inbound connections from the public switched telephone network. The company also offers voice and data solutions, including tracking devices for personnel and assets, secure satellite handsets for the military, and beyond-line-of-sight aircraft and maritime communications applications. The company’s products and services are sold via a wholesale distribution network, including service providers, value-added resellers, and manufacturers.
The company recently secured a $491.6 million contract modification from the Space Development Agency (SDA) in partnership with General Dynamics Mission Systems (GDMS). The new contract will enable GDMS-Iridium to deliver a cutting-edge ground system in collaboration with SDA, providing services that range from engineering design and testing to maintenance and site support. Additionally, it will fund the growth of Iridium’s Ground Management and Integration (GMI) program for the Proliferated Warfighter Space Architecture (PWSA) over the next five years.
In other news, Iridium has announced significant progress with its third Generation Partnership Project (3GPP). This development targets the functionality of Iridium’s Narrowband Internet of Things (NB-IoT) for Non-Terrestrial Networks (NTN). The advancement will make Iridium’s satellite service accessible via standard industry chipsets and aid in deploying Iridium NTN Direct, a global 5G NB-IoT service. Iridium NTN Direct will likely provide opportunities for various tech sectors, like smartphone companies and mobile network operators, to leverage Iridium’s existing network, allowing for a low-latency, global user experience.
Analysis of Iridium’s Recent Financial Results & Outlook
The company recently announced its results for Q3 2024, reporting record total revenue of $212.8 million, including service revenue of $159.9 million and revenue from equipment sales and engineering support projects amounting to $52.9 million. This resulted in a record operational EBITDA of $124.4 million compared to the previous year’s result of $121.3 million. Net income of $24.4 million starkly contrasted to a net loss of $1.6 million in the same period for 2023.
Iridium ended Q3 with a net debt balance of $1.7 billion, reflecting net leverage of 3.5 times the trailing twelve months EBITDA. Its Board of Directors approved repurchasing an additional $500 million of Iridium common stock through December 31, 2027.
Management has updated its full-year 2024 outlook, projecting revenue growth of around 5% over the $584.5 million in 2023. The full-year 2024 EBITDA is forecasted to be between $465 million and $470 million, compared to $463.1 million in 2023. Net leverage is planned to stay below 4.0 times OEBITDA through 2026 before declining to less than 2.0 times OEBITDA by the decade’s end.
What Is the Price Target for IRDM Stock?
The stock has been on a bit of a rollercoaster ride over the past few years and is down 27% over the three-year period. It trades near the lower end of its 52-week price range of $24.14 – $41.66, showing ongoing negative price momentum, as it trades below the 20-day (30.09) and 50-day (28.96) moving averages. Despite the prolonged decline in share price, the stock still trades at a premium to peers in the Telecom Services industry, with its P/S ratio of 4.4x compared to the industry average of 1.4x.
Analysts following the company have mostly been constructive on the stock. Iridium Communications is rated a Strong Buy overall, based on four analysts’ recent recommendations. The average price target for IRDM stock is $37.50, which represents a potential upside of 25.92% from current levels.
IRDM in Review
Iridium Communications has made significant strides as a mobile voice and data satellite communications provider. The company’s recent contract with the Space Development Agency projects revenue growth alongside a continued focus on innovative services like the Narrowband Internet of Things for Non-Terrestrial Networks. The stock trades at a premium while showing negative price momentum, so astute investors may want to hold off and look for a more advantageous entry point.
