Feb 12, 2021
[3 min Read]
Viasat Inc. (NASDAQ: VSAT) is an American communications company and a provider of high-speed satellite broadband services and secure networking systems
Viasat provides digital satellite, networking, and signal processing equipment for government and
commercial clients. Viasat conducts its business through three segments:
▪ Government Systems:
❑ Develops and implements fixed and mobile secure communications systems for federal agencies
such as Department of Defense and its contractors.
▪ Satellite Services:
❑ Provides retail and wholesale broadband internet for its consumer, enterprise and mobile customers
in the U.S. As of March 31, 2020 Viasat provided fixed broadband services to 590,000+ subscribers
and IFC services to 1,390 commercial aircraft in service.
▪ Commercial Networks:
❑ Develops and produces advanced satellite and wireless products, including satellite-based and
wireless broadband platforms, networking equipment, and space hardware.
Industry Growth Trends:
▪ The world achieved greater than 50% global broadband internet
penetration in 2019
▪ Large percent of population is still unconnected due to internet
costs and lack of internet usage knowledge
▪ Total addressable market for satellite broadband to be 430+ million
households and is currently servicing only 0.63%
▪ Satellite broadband is the core to achieving higher and improved
penetration in underserved areas
▪ The market for connected planes, trains and motor vehicles is likely to
reach $36 billion in 2025
▪ Viasat continues to drive down bandwidth costs in order to capture
market share and grow its operations
(Industry Estimated Revenue Growth, Bloomberg)
▪ Elevated Debt Levels Increases Bankruptcy and Refinance Risks
❑ Given its capital intensity and the chance of interest rates rising
over the long-term, VSAT might be burdened with higher interest
costs, causing it to be unable to service principal repayments.
▪ SpaceX Creates Looming Risks of Future Margin Pressure
❑ SpaceX's entrance into the industry has increased competition
within the industry with its project Starlink. SpaceX has the ability
to dominate the industry and offer a satellite service at a much
lower price, cutting into Viasat's margins and profitability.
▪ Increasing Regulatory Risks of FCC Oversight
❑ One of the major factors that hinders Viasat's expansion are the
strict regulations imposed by the FCC on projects that they take
on. This can provide future issues with the contracts that Viasat's
accepts and may cause a material loss in revenue.
Final Investment Summary:
▪ Viasat offers an attractive risk/reward to investors trading at a solid margin of safety
▪ At the current levels, Viasat is a strong value play with great long term compounding potential with the expansion of the Total Addressable Market
▪ Even if Viasat were to only captures 10% of market share, there is confidence to believe the investment still offers significant upside to the current levels alongside its growing revenues and profits.
▪ Recommend a BUY rating on Viasat with a possible 50% upside