EchoStar (NASDAQ:SATS) stock is up 49% today after Bloomberg broke the news late Friday that former President Donald Trump had summoned EchoStar chairman Charlie Ergen to the White House, phoned FCC Chair Brendan Carr, and urged both men “to work out a deal” so the company would not go bankrupt.
EchoStar controls a large block of 2 GHz, AWS-4, 600 MHz, and 700 MHz spectrum that it promised to use for a nationwide 5G network by 14 June 2025. However, the Federal Communications Commission opened a formal inquiry into whether or not it was meeting those build-out obligations.
EchoStar had already missed around $500 million in interest payments. Its explanation was that the spectrum cloud had “effectively frozen” its ability to raise capital.
Today’s rally is mostly thanks to mediation from the White House. It preserves the spectrum and keeps EchoStar’s plan to be the fourth national 5G operator alive. The value of that could be in the tens of billions.
Buying in right after a 49% surge isn’t something I’d recommend, but if a company like EchoStar is receiving attention from the President himself, it’s worth taking a closer look at. Wall Street is obviously going to slap a premium just for that, but to what extent can only be guessed.
I believe the SATS stock still has more short-term upside potential left, so this could be a speculative buy. That said, the long-term is not that promising. The 3-year revenue growth rate is at -3% annually, whereas the 3-year EBITDA growth rate is -17% annually. Future revenue growth rate for the rest of this decade is also at around -1% annually, along with a -35.6% annual revenue growth rate. The financials here are unlikely to hold up the price in the long run.
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