Why This Analyst Maintains A Sell Rating Following ViaSat's Q4 Earnings

ViaSat, Inc. VSAT reported mixed results for F4Q16, with P&L coming in below consensus, while operating cash flow was robust and the book to bill ratio was higher than 1.

Wunderlich’s Matthew S. Robison maintained a Sell rating on the company, while raising the price target from $48 to $50.

Mixed F4Q16

Robinson mentioned that the book/bill ratio was driven by the Commercial Networks and Government Systems businesses.

ViaSat reported negative free cash flow of $43 million, better than the estimate. Robinson stated, however, that “this variance is incidental in light of F2017 spending acceleration for the ViaSat-3 system.”

Subscriber growth for Satellite Services recovered, with 9.5k net addition during the quarter, while the average revenue per user continued to rise, reaching $58.46 by the end of the quarter.

‘Aeronautical and meriting Satellite Services sales were down slightly to $17.1 million from $17.4 million in F3Q16, but still up significantly from $11.9 million in F4Q15,” Robinson said.

Revenue for Government Systems missed the estimate, driving an overall revenue miss, although bookings reached a record $241 million.

Higher Than Expected Investments

ViaSat cut its profit and cash flow guidance due to higher than expected ViaSat-3 spending.

According to the Wuderlich report, however, “Even though ViaSat is arguably best of class, we do not think the market will be large enough to so richly justify the company’s investment.”