4 Ideas Investors Should Accept Before Buying ViaSat Shares

ViaSat, Inc. VSAT is poised for solid medium- and long-term growth from the launches of Viasat-2 and Viasat-3, Wells Fargo’s Andrew Spinola said in a report. He upgraded the rating on the company to Outperform, while raising the valuation range to $94-$98.

4 Ideas To Consider

Spinola believes investors should consider the following before making an investment in Viasat:

1. Past and ongoing investments could result in substantial medium-term and long-term growth in EBITDA, and eventually in Free Cash Flows
2. The IRR [internal rate of return] on V-2 and V-3 investments could prove to be significant higher than the cost of capital
3. There could be substantial demand globally for consumer satellite broadband
4. Viasat has a technological advantage in High-Throughput Satellite [HTS] networks, which could enable the company to gain share in data and mobility markets to fill all three V-3 satellites

“[W]hile we in no way believe all of these statements are definitively true, we believe the risk/reward across the question set is strongly in our favor,” Spinola commented. He added that first Echostar Corporation SATS and then Viasat would “reignite strong growth in consumer broadband subscribers in 2017.”

The analyst expressed concern regarding the scale of the second and third Viasat-3s and the demand/execution risk in filling those satellites in the EMEA/APAC (Europe, the Middle East and Africa/Asia-Pacific) regions. The EPS estimates for F2017 and F2018 have been reduced from $1.05 to $1.02 and from $0.54 to $0.46, respectively.