Satellite communications company Globalstar (NYSEAMERICAN:GSAT) had been trending in the past couple of months on speculation that Apple’s (NASDAQ:AAPL) new iPhone would support satellite telephony capability. However, the big iPhone reveal took place on Sept. 14 without mentioning any satellite phone capability. Subsequently, GSAT stock shed over 20% of its value and has investors concerned about whether it would fall to the same lows it did in April.
Perhaps the company most anxious about the iPhone 13 reveal was Globalstar. Had it emerged as a communications partner with Apple and secured a lasting relationship, it would’ve been a game-changer for the business. However, the reality is there was no satcom announcement at Apple’s big event this month, which is likely to be a crushing blow for the company.
GSAT is currently an unprofitable enterprise and trades at more than 23 times forward sales. Moreover, with the competition in its satellite communications, its margins and market share will continue to shrink over time.
What Might Have Been
Globalstar’s Low Earth Orbit (LEO) satellites provide stable, robust and widespread internet coverage, especially in areas without 4G and 5G. Additionally, its 24 ground stations serve as a bridge between its satellites and communications infrastructures, which span across over 120 countries. A partnership with Apple would’ve likely made a lot of money for both companies.
Notably, Apple has flirted with the idea of satcom in the past. Back in 2019, Apple’s CEO Tim Cook stated his interest in an internal research project using satellites to circumvent terrestrial wireless networks.
A couple of years later, industry insiders felt that Apple would finally make a move to support satellite telephony. Theoretically, Globalstar’s satellite support could’ve been blended in with the help of Qualcomm (NASDAQ:QCOM). Qualcomm has included Globalstar’s band n53 in its latest 5G X65 modem, which significantly expands the operator’s device ecosystem. Band n53 could effectively transform the future of mobile communications.
Furthermore, a potential partnership with Apple would’ve increased the volume of its new subscribers significantly.
Operational Performance of GSAT Stock
Globalstar’s operational performance has been on a downward spiral in the past few quarters. In second-quarter 2021, overall sales dipped from the same quarter last year. Service revenues were down due to fewer Duplex subscribers as the company shifted its resources to other income streams. However, service revenues from commercial IoT subscribers rose by 5% in the quarter due to a higher ARPU.
Globalstar is up against some stiff competition in its industry, which is why its pricing strategies are paramount. In terms of satellite phones and related gadgets, some of its competition includes, InReach, Iridium (NASDAQ:IRDM) Go, and the Thuraya X5-Touch.
It did generate higher revenues from SPOT, its largest operating segment during the quarter. However, the lower ARPU in the segment shows the impact of the intense competition in the sector.
On a more encouraging note, the company reduced its leverage to less than $50 million of first-lien principal outstanding. Additionally, it had $51 million in restricted cash and received $37.5 million in advance payment from a customer.
GSAT stock had been flying high on speculation that Apple would give its underlying business a much-needed breakthrough. However, none of that has culminated, and the stock is now losing its value with every passing day. It doesn’t have any growth catalysts on the horizon, and with the Apple deal falling through, things are looking incredibly rough for GSAT stock.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.