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Iridium Gains 21% in Past Six Months: Is it Time to Buy the Stock?
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Iridium Communications Inc (IRDM - Free Report) stock has gained 21% in the past six months compared with the S&P 500 composite’s growth of 9.9%. IRDM stock gained 1.9% in the last trading session and closed at $31.02. IRDM is trading 31.2% below its 52-week high of $45.07, reached on Oct. 5, 2023.
The stock had a dreary run on the trading front for most of the year. Recent developments, including a new stock buyback program and the launch of new services like Iridium NTN Direct, along with improving quarterly numbers, have buoyed the stock price performance.
Image Source: Zacks Investment Research
Given the stock’s newfound momentum, investors are likely to contemplate remaining on board. Let’s decode IRDM’s prospects and weaknesses to determine the best course of action regarding the stock.
IRDM’s Focused on Driving Service Revenues
Iridium benefits from a highly lucrative recurring service revenue base. The company has witnessed steady subscriber growth and mobile penetration backed by an efficient operating model. Iridium is focused on augmenting commercial and government service revenues to leverage its fixed-cost infrastructure. In the second quarter of 2024, total service revenues rose 5% year over year to $152.5 million, owing to strong recurring revenues from an expanding subscriber base.
For 2024, the company suggests total Service revenue growth to be between 4% to 6%. It expects to generate about $1 billion in annual Service revenues by 2030. To achieve its long-term goal, management is focused on several drivers, which include Satellite Time and Location (STL) service, Midband services, Direct-to-Device and satellite-based personal communication devices.
As part of this, the company recently announced that the 3rd Generation Partnership Project (3GPP) has approved its request to broaden the capability of Narrowband Internet of Things (NB-IoT) for Non-Terrestrial Networks (NTN) into the official Work Plan for 3GPP Release 19 (set to conclude in the fourth quarter of 2025). This will result in Iridium's satellite service being accessed through the industry standard chipsets. The initiative augments Iridium’s footprint in global connectivity through its latest service, Iridium NTN Direct, which is expected to be the world's first global 5G NB-IoT service.
Moreover, the acquisition of Satelles (April 2024) has enhanced Iridium’s solution portfolio with advanced STL services, which is now referred to as Iridium STL. The acquisition aligns with Iridium's strategy of investing in advanced technologies that excel within its network. The Iridium STL business is likely to generate more than $100 million in service revenues per year by 2030. The company also expects to generate additional revenues from equipment and engineering.
IRDM’s Impressive Buyback Plan
On Sept. 19, 2024, IRDM announced its fourth stock repurchase authorization in four years. The latest $500 million authorization, approved by its board of directors, is the largest in the company’s history. It extends the total buyback authorization to $1.5 billion through Dec. 31, 2027.
Iridium's stock repurchase program began in February 2021 with an initial authorization of $300 million. This was followed by another $300 million in March 2022 and $400 million in July 2023. Earlier in the year, IRDM increased its quarterly dividend to 14 cents per share, resulting in year-to-date dividend payments of $32.8 million.
One of the key factors driving Iridium’s ability to return capital to its shareholders is meaningful free cash flow generation, which the company began generating after completing the Iridium NEXT satellite constellation program. The Iridium NEXT project replaced the company’s original satellite constellation with advanced satellites and services like Iridium Certus, providing better coverage and improved performance across the globe.
As Iridium continues to execute its long-term growth strategy, the company’s commitment to maximizing the value of its shareholders remains a top priority, making it one of the most shareholder-friendly companies in the space and technology industries.
Strong Technical Indicators & Northbound Estimates for IRDM
Reflecting the positive sentiment around IRDM, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Though the current quarter estimates have remained unchanged, analysts have increased their estimates for the next quarter by 5.3% in the past 60 days. The earnings estimates for current and next years have been revised upward by 5.2% and 2%, respectively.
Image Source: Zacks Investment Research
The stock is trading above its 100-day and 200-day moving averages, indicating upward momentum and price stability. This technical strength reflects positive market perception and confidence in its growth prospects.
Image Source: Zacks Investment Research
Debt Load & Competition Concerns for IRDM
Intense competition in the satellite space and a leveraged balance sheet are major concerns for IRDM. As of June 30, total cash, cash equivalents and marketable securities were $63.5 million, with $1.6 billion of net debt. Also, weakness in global macroeconomic conditions could compel customers to lower spending, which does not bode well for Iridium and its other peers.
Further, soft demand trends in the Equipment business are concerning. It expects equipment sales for 2024 to fall year over year, aligning with the pre-2022 levels.
IRDM’s Expensive Valuation
IRDM stock is trading at a premium with a trailing 12-month price/book of 4.67X compared with the industry’s 0.36X.
Image Source: Zacks Investment Research
Is This a Good Time to Invest in IRDM Stock?
IRDM’s impressive buyback plan, improving sales performance and launch of new services bode well. Though its massive debt and premium valuation may raise eyebrows, we believe the momentum in satellite space will continue to gain steam amid increasing proliferation and cheaper access to space technology. IRDM has significant growth potential attributed to surging defense budgets and demand for high-quality imagery and value-added services.
Given the significant pullback from its 52-week high, investors have an opportunity to invest in this Zacks Rank #2 (Buy) stock. Apart from a favorable rank, IRDM has a Growth Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
The Zacks Consensus Estimate for STX’s fiscal 2025 EPS is pegged at $7.41, unchanged in the past 30 days. STX’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in the remaining quarter, with the average surprise being 80.9%. The stock has surged 64.4% in the past year.
The Zacks Consensus Estimate for NTAP’s fiscal 2025 earnings is pegged at $7.08, unchanged in the past seven days. NTAP’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 8.6%. Its shares have gained 62% in the past year.
The Zacks Consensus Estimate for American Software’s fiscal 2025 EPS is pegged at 38 cents, unchanged in the past seven days. AMSWA’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while matching in the remaining quarter, with the average surprise being 84.5%. Its shares have declined 2.2% in the past year.
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Iridium Gains 21% in Past Six Months: Is it Time to Buy the Stock?
Iridium Communications Inc (IRDM - Free Report) stock has gained 21% in the past six months compared with the S&P 500 composite’s growth of 9.9%. IRDM stock gained 1.9% in the last trading session and closed at $31.02. IRDM is trading 31.2% below its 52-week high of $45.07, reached on Oct. 5, 2023.
The stock had a dreary run on the trading front for most of the year. Recent developments, including a new stock buyback program and the launch of new services like Iridium NTN Direct, along with improving quarterly numbers, have buoyed the stock price performance.
Image Source: Zacks Investment Research
Given the stock’s newfound momentum, investors are likely to contemplate remaining on board. Let’s decode IRDM’s prospects and weaknesses to determine the best course of action regarding the stock.
IRDM’s Focused on Driving Service Revenues
Iridium benefits from a highly lucrative recurring service revenue base. The company has witnessed steady subscriber growth and mobile penetration backed by an efficient operating model. Iridium is focused on augmenting commercial and government service revenues to leverage its fixed-cost infrastructure. In the second quarter of 2024, total service revenues rose 5% year over year to $152.5 million, owing to strong recurring revenues from an expanding subscriber base.
For 2024, the company suggests total Service revenue growth to be between 4% to 6%. It expects to generate about $1 billion in annual Service revenues by 2030. To achieve its long-term goal, management is focused on several drivers, which include Satellite Time and Location (STL) service, Midband services, Direct-to-Device and satellite-based personal communication devices.
As part of this, the company recently announced that the 3rd Generation Partnership Project (3GPP) has approved its request to broaden the capability of Narrowband Internet of Things (NB-IoT) for Non-Terrestrial Networks (NTN) into the official Work Plan for 3GPP Release 19 (set to conclude in the fourth quarter of 2025). This will result in Iridium's satellite service being accessed through the industry standard chipsets. The initiative augments Iridium’s footprint in global connectivity through its latest service, Iridium NTN Direct, which is expected to be the world's first global 5G NB-IoT service.
Moreover, the acquisition of Satelles (April 2024) has enhanced Iridium’s solution portfolio with advanced STL services, which is now referred to as Iridium STL. The acquisition aligns with Iridium's strategy of investing in advanced technologies that excel within its network. The Iridium STL business is likely to generate more than $100 million in service revenues per year by 2030. The company also expects to generate additional revenues from equipment and engineering.
IRDM’s Impressive Buyback Plan
On Sept. 19, 2024, IRDM announced its fourth stock repurchase authorization in four years. The latest $500 million authorization, approved by its board of directors, is the largest in the company’s history. It extends the total buyback authorization to $1.5 billion through Dec. 31, 2027.
Iridium's stock repurchase program began in February 2021 with an initial authorization of $300 million. This was followed by another $300 million in March 2022 and $400 million in July 2023. Earlier in the year, IRDM increased its quarterly dividend to 14 cents per share, resulting in year-to-date dividend payments of $32.8 million.
One of the key factors driving Iridium’s ability to return capital to its shareholders is meaningful free cash flow generation, which the company began generating after completing the Iridium NEXT satellite constellation program. The Iridium NEXT project replaced the company’s original satellite constellation with advanced satellites and services like Iridium Certus, providing better coverage and improved performance across the globe.
As Iridium continues to execute its long-term growth strategy, the company’s commitment to maximizing the value of its shareholders remains a top priority, making it one of the most shareholder-friendly companies in the space and technology industries.
Strong Technical Indicators & Northbound Estimates for IRDM
Reflecting the positive sentiment around IRDM, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Though the current quarter estimates have remained unchanged, analysts have increased their estimates for the next quarter by 5.3% in the past 60 days. The earnings estimates for current and next years have been revised upward by 5.2% and 2%, respectively.
Image Source: Zacks Investment Research
The stock is trading above its 100-day and 200-day moving averages, indicating upward momentum and price stability. This technical strength reflects positive market perception and confidence in its growth prospects.
Image Source: Zacks Investment Research
Debt Load & Competition Concerns for IRDM
Intense competition in the satellite space and a leveraged balance sheet are major concerns for IRDM. As of June 30, total cash, cash equivalents and marketable securities were $63.5 million, with $1.6 billion of net debt. Also, weakness in global macroeconomic conditions could compel customers to lower spending, which does not bode well for Iridium and its other peers.
Further, soft demand trends in the Equipment business are concerning. It expects equipment sales for 2024 to fall year over year, aligning with the pre-2022 levels.
IRDM’s Expensive Valuation
IRDM stock is trading at a premium with a trailing 12-month price/book of 4.67X compared with the industry’s 0.36X.
Image Source: Zacks Investment Research
Is This a Good Time to Invest in IRDM Stock?
IRDM’s impressive buyback plan, improving sales performance and launch of new services bode well. Though its massive debt and premium valuation may raise eyebrows, we believe the momentum in satellite space will continue to gain steam amid increasing proliferation and cheaper access to space technology. IRDM has significant growth potential attributed to surging defense budgets and demand for high-quality imagery and value-added services.
Given the significant pullback from its 52-week high, investors have an opportunity to invest in this Zacks Rank #2 (Buy) stock. Apart from a favorable rank, IRDM has a Growth Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
Other Stocks to Consider
Some better-ranked stocks worth consideration in the broader space are Seagate Technology Holdings plc (STX - Free Report) , NetApp (NTAP - Free Report) and American Software, Inc. (AMSWA - Free Report) . While Seagate and NetApp sport a Zacks Rank #1 (Strong Buy) each, AMSWA carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for STX’s fiscal 2025 EPS is pegged at $7.41, unchanged in the past 30 days. STX’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in the remaining quarter, with the average surprise being 80.9%. The stock has surged 64.4% in the past year.
The Zacks Consensus Estimate for NTAP’s fiscal 2025 earnings is pegged at $7.08, unchanged in the past seven days. NTAP’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 8.6%. Its shares have gained 62% in the past year.
The Zacks Consensus Estimate for American Software’s fiscal 2025 EPS is pegged at 38 cents, unchanged in the past seven days. AMSWA’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while matching in the remaining quarter, with the average surprise being 84.5%. Its shares have declined 2.2% in the past year.