Time To Book Profits on This Mid-Cap Communications Equipment Provider – VSAT

Mar 10, 2022 12:00 AM PST | Team Kalkine
Time To Book Profits on This Mid-Cap Communications Equipment Provider – VSAT


ViaSat, Inc.

ViaSat, Inc. (NASDAQ: VSAT) offers three types of bandwidth technologies and services: Satellite services, which provides businesses and commercial airlines with satellite-based high-speed broadband services; Commercial networks, which develops end-to-end communication and connectivity systems; and Government systems, which produces network-centric Internet Protocol-based secure government communication systems.

Why should Investors Book Profits?

  • Bottomline Stress: The company reported losses of USD 3.99 million in Q3FY22 (ended December 31, 2021) compared to a profit of USD 7.76 million in Q3FY21, due to a significant increase in operating expenses.
  • Leveraged Balance Sheet: The company's debt/equity ratio was 0.83x as of December 31, 2021, compared to the industry median of 0.23x. In addition, its long-term debt-to-total-capital ratio was 44.3%, compared to 14.2% for the same period in the industry. The company's exposure to balance-sheet risk has increased due to this.
  • Decline in Cash Position: VSAT reported a decrease in cash and cash equivalents to USD 166.03 million as of December 31, 2021, from USD 295.95 million as of December 31, 2020, due to a considerable decline in net cash provided by operating activities.
  • Fall in Backlog: VSAT reported a USD 2.14 billion total firm backlogs as of December 31, 2021, down from USD 2.31 billion as of March 31, 2021. It also revealed that the funded backlog had decreased to USD 1.94 billion as of December 31, 2021, down from USD 2.12 billion as of March 31, 2021.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

VSAT's share price has surged 24.42% in the past month and is currently leaning towards the mid-band of its 52-week range of USD 39.13 to USD 68.76. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at ~68.35, implying an overbought zone and indicating a correction in the stock price. We have valued the stock using the EV/EBITDA multiple based relative valuation methodology and arrived at a target price of USD 45.40.

Considering the surge in the stock price in the brief period, a decline in cash position and backlogs, leveraged balance sheet, current valuation, and other technical indicators, we recommend a "Sell" rating on the stock at the current price of USD 51.10, down 0.55% as of March 09, 2022, at 3:10 PM ET.

Three-Year Technical Price Chart (as of March 09, 2022, at 3:10 PM ET). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.