Facebook Is Quietly Supporting This Satellite Company With 40% Upside

In a new report, Macquarie analyst Andrew DeGasperi discusses the firm’s bullish take on European-listed EUTELSAT COMMUNICA EUR1 EUTLF. Eutelsat provides satellite communication services.

DeGasperi believes that the stock is currently priced about 10 percent below its peers based on 2017 EV/EBITDA estimates.

“Multiples should benefit from its 4% dividend yield, a new CEO at the helm and its relatively sticky business model, which generates EBITDA margin of 75%+,” DeGasperi explains.

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Macquarie sees Eutelsat as a solid play on the secular growth trend in HD video.

While fixed satellite broadband is old news in much of the developed world, DeGasperi believes there is about a 4 billion person emerging market growth opportunity remaining in areas that lack terrestrial infrastructure.

In addition, Cisco projects that handheld wireless devices could triple data consumption by 2018.

Eutelsat has already won over a series of big name partners, including ViaSat, Facebook Inc FB, and Echostar.

So far in 2016, global equity markets seem to be shifting from growth stocks to value and dividend plays, and DeGasperi believes that Eutelsat’s 8% FCF yield will help support the stock’s generous 4 percent dividend. In addition, the launches of 65WA and 117WB could serves as catalysts for the stock. Macquarie has an Outperform rating on Eutelsat’s European-listed stock.

Disclosure: the author holds no position in the stocks mentioned.