Lekha Gupta
2 min read
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JP Morgan analyst Sebastiano C Petti expressed views on EchoStar Corporation (NASDAQ:SATS) earnings reported on May 9.
The company reported a loss of 71 cents per share, missing the analyst consensus estimate of 69 cents loss and sales of $3.87 billion, in line with the Street view.
The analyst notes that, during the earnings call, CEO Hamid Akhavan reiterated the company’s ambition to establish itself as a “leading provider of global direct-to-device connectivity,” leveraging its international S-band spectrum and domestic AWS-4 assets.
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Akhavan assured investors that EchoStar is not “missing the window of opportunity,” and noted that more concrete updates will be shared as plans mature, adds the analyst.
Petti says that, on the operational front, wireless subscriber growth continues to gain traction, which management attributes to enhanced marketing initiatives, improved digital engagement, better customer retention, and appealing offers tailored to a challenging macroeconomic environment.
However, the acceleration in customer acquisition is putting pressure on near-term financials due to higher subscriber acquisition costs (SAC), though management expects this to pay off in improved long-term customer lifetime value (CLV), says the analyst.
Consequently, Petti now estimates 2025 wireless retail net additions at 775,000, up from the previous estimate of 400,000.
Nevertheless, this is accompanied by a deeper OIBDA (Operating Income Before Depreciation and Amortization) loss for the segment, revised to $1.90 billion.
On a consolidated basis, the analyst have lowered the OIBDA estimate to $1.43 billion (from $1.83 billion), factoring in the increased wireless drag but also recognizing improved trends in PayTV, driven by cost efficiencies.
The analyst notes EchoStar is prioritizing wireless subscriber growth and its long-term vision for direct-to-device connectivity. This strategic focus is, however, currently incurring a significant OIBDA drag.
Furthermore, the ongoing FCC review of EchoStar’s spectrum assets is introducing a substantial layer of regulatory uncertainty, which Petti believes could potentially impact the company’s future strategic options and overall valuation.
Investors can gain exposure to the stock via Procure Space ETF (NASDAQ:UFO).
Price Action: SATS shares are trading lower by 1.94% to $21.73 at last check Wednesday.
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