Why Morgan Stanley Is Downgrading Globalstar After Strong Rally

Globalstar, Inc’s GSAT stock has rallied in the recent weeks, rising 266% year-to-date and 297% over the past three months, and valuation looks full, according to Morgan Stanley.

The Globalstar Analyst: Simon Flannery downgraded Globalstar from Equal-weight to Underweight with an unchanged 55-cent price target. 

The Globalstar Thesis: While the bull case seems to be priced into the company’s shares, there is uncertainty around “a spectrum monetization event,” Flannery said in the Friday downgrade note.

Globalstar’s stock has rallied due to several positive developments, including the broader small cap rally, “increased investor interest across the Space ecosystem,” deals inked with Nokia, Port of Seattle and Ceres Tag, as well as an increase in C-Band spectrum auction spending, “highlighting the importance of mid-band spectrum as carriers look to expand 5G offerings,” the analyst said. 

“The implied spectrum valuation now stands at ~$0.60 / MHz-Pop, below C-Band pricing, but well above the recent CBRS auction. … The company also needs to raise approximately $41m of equity by March 31, 2021, which the company expects will come via warrant exercise. At current levels we believe the stock is discounting a bullish view of their spectrum value.” 

GSAT Price Action: Shares of Globalstar lost 16.13% in Friday's session, closing at $1.04. 

Photo courtesy of Globalstar.