📈 Fed's first cut since 2020: Time to buy the dip? See Tech-focused stock picksUnlock AI Picks

JPMorgan cuts Viasat stock to Neutral on low-Earth orbit risks, shares down

Published 2024-09-17, 06:38 a/m
© Reuters.
VSAT
-

JPMorgan analysts on Tuesday revised their rating for Viasat (VSAT), from Overweight to Neutral, citing the accelerating threat of low Earth orbit (LEO) disruption.

VSAT shares fell around 5% in the premarket trade.

Last week, United Airlines (UAL) announced plans to transition over 1,000 mainline aircraft to Starlink for in-flight connectivity (IFC). The transition, which is set to begin with trials next year, is expected to impact Viasat's service, as the company currently provides satellite capacity for a portion of United's fleet.

The financial firm estimates that Viasat could lose around $60-80 million, or 1-2% of its projected FY25 revenue, due to the change. This figure is based on the assumption that approximately 500 planes, both directly serviced by Viasat and those using LiveTV/Thales systems that rely on Viasat's satellite capacity, will be affected. The full impact is anticipated to materialize by calendar year 2027 as existing IFC contracts expire.

Despite recent contract wins with LOT Polish Airlines, Korean Air, Royal Jordanian Airlines, and Icelandair, the shift by United Airlines flags a potential risk to Viasat's long-term market share in the IFC and broader mobility segments.

“While we believe displacing VSAT’s leading market share in commercial IFC will likely take some time, and require significant execution from competitors, a well-heeled Starlink is difficult to bet against long-term even if impacting share of new wins/RFPs marginally,” analysts explained.

“We believe competitive fears are overblown (near-term) but expect the competitive overhang on shares to be difficult to dispel after last week’s announcement.”

This, JPMorgan notes, could mark the beginning of a significant shift toward larger low-Earth orbit (LEO) share wins.

“In our view, if airlines increasingly move to a single-source IFC provider/solution across their respective fleets, LEO displacement of legacy GEO providers could occur at an accelerating rate,” analysts noted.

Nonetheless, Viasat's Defense and Advanced Technology segment provides some valuation support, leading JPMorgan to maintain a Neutral rating despite the challenges.

Reflecting the expected reduction in mobility revenue, JPMorgan has also revised its price target for Viasat, lowering it to $15 from the previous $29.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.